An Agency Approach to Local Authorities' Behaviour

Ana Bravo () and Antonio Silvestre

ERSA conference papers from European Regional Science Association

Abstract: This paper aims at presenting a simple model of local decision-making based on the hypothesis of monopoly power on the part of local governments. It adds the contribution of the principal-agent theory by assuming that: (a) monopolistic behavior is constrained by voters’ efforts to monitor the outcomes of policies; (b) local governments’ policies affect local property values. Given those assumptions, the degree of capitalization of property taxes is shown to determine the incentive for voters’ control over policies’ outcomes.

Date: 2006-08
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Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa06p898

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