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Taming the Local Leviathan

Institutional and Economic Constraints on Municipal Budgets

Michigan State University

Democratic political institutions and interjurisdictional competition both put pressure on local elected officials to respond to the tax and spending preferences of residents. But the electoral success of California's Proposition 13 in 1978 and of similar property tax limitations in other states suggests that local expenditures and taxes in many jurisdictions are higher than those preferred by the median voter. I argue that this upward bias in expenditures is greater in communities where interjurisdictional competition is weak and local political institutions provide incentives for rent seeking. Using data from the 1997 Census of Governments and 1996 International City Manager Association (ICMA) Form of Government Survey, I find evidence that municipalities facing weaker competition tend to have higher spending, and political institutions mediate the marginal effect of competition on city expenditures.

Key Words: interjurisdictional competition • reformism • Leviathan hypothesis • institutions • budget

This version was published on May 1, 2008

Urban Affairs Review, Vol. 43, No. 5, 663-690 (2008)
DOI: 10.1177/1078087407311588


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