Nelson, M. A. (1990). Decentralization of the subnational public sector: An empirical analysis of the determinants of local government structure in metropolitan areas in the US.

The objectives of this research are twofold. The first involves addressing the following question: To what extent can the degree of homogeneity of citizen preferences for locally-provided public services explain the considerable differences that exist in local government organization among major metropolitan areas in the U.S.? Despite the substantial theoretical literature on this topic, there has been surprisingly little in the way of empirical research that has applied the theory to explain actual patterns of governmental structure. The second objective is to investigate the role that widely-varying state regulations on local government structure play in the determination of actual local government patterns. Of specific interest is to identify which particular state rules, if any, effectively constrain local decisions on governmental organization, and to understand how each constraint alters the structure of local governments over what would otherwise exist. Although the level of self-insurance activity is monotonically increasing in the individual’s degree of risk aversion, the same cannot be said for self-protection and it is possible for a more risk-averse individual to utilize a lower level of self-protection. The use of self-protection actually increases the downside risk of the wealth distribution in the sense of transforming the wealth distribution via both a mean-preserving contraction at higher wealth levels and a mean-preserving spread at lower wealth levels. However, since the variance of final wealth does not usually remain constant, and might even increase through the use of self-protection, we generally cannot rank distributions based on the downside risk measures set forth in Menezes, Geiss, and Tressler. For the special case where an (infinitely) small addition to self-protection maintains the variance of the final-wealth prospect, self-protection would actually decrease welfare and the optimal level would be zero. The main conclusion one can…

 

Nelson, M. A. (1990). Decentralization of the subnational public sector: An empirical analysis of the determinants of local government structure in metropolitan areas in the US. Southern Economic Journal, 443-457.

DOI: 10.2307/1060622