Competition, knowledge, and local government

Dean Stansel ()

The Review of Austrian Economics, 2012, vol. 25, issue 3, 243-253

Abstract: This paper applies the insights of Austrian economics to an important issue in local political economy. Basic economic theory holds that greater competition produces superior outcomes in private goods markets. The same should be true in the “markets” for the output of local government. Brennan and Buchanan ( 1977 , 1980 ) show that interjurisdictional competition may serve as a potential restraint on the monopoly powers of local Leviathan and Tiebout ( 1956 ) shows that it may help lead to the production of efficient quantities of local public goods. However, other potential virtues of competition in the market for local collective goods have been largely ignored. This paper explores those other virtues as well as the neoclassical theoretical foundations of the Tiebout ( 1956 ) model, upon which much of this literature is based. This has public policy implications for local governments, which have taken on increased importance given the recent global movement towards more decentralized government. Copyright Springer Science+Business Media, LLC 2012

Keywords: Interjurisdictional competition; Fragmentation; Decentralization; Federalism; Leviathan; Local government; H7; R5 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11138-011-0168-y

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