State Aid Formulas and the Local Incentive to Chase (or Shun) Ratables

Paul D. Gottlieb
Additional contact information
Paul D. Gottlieb: Department of Agricultural, Food and Resource Economics, Cook College, Rutgers University, 55 Dudley Road, New Brunswick, NJ 08901, USA, gottlieb@aesop.rutgers.edu

Urban Studies, 2006, vol. 43, issue 7, 1087-1103

Abstract: Most programmes of state aid to local governments in the US are designed to fix problems of interjurisdictional or interpersonal equity, not to address the effect that local tax reliance might have on local land use decisions, such as zoning. As a consequence, little is known about how to design a state aid system that would achieve desirable land use, as opposed to equity, objectives within US states. As a first contribution to this policy literature, the paper compares state aid formulas on their ability to reduce the incentive that local governments have to engage in fiscal zoning and other ratable-oriented behaviour. A set of simulations shows that a state aid formula that guarantees to cover a fixed percentage of local expenditures is preferable to a per capita aid formula in three out of four cases examined and performs better when the level of aid is relatively high. Both types of formula reliably reduce ratable shunning behaviour, but it may take relatively large levels of state aid to curb ratable chasing, due to the increase in local spending caused by the aid itself. The paper ends with a discussion of state aid programmes actually used in New Jersey.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1080/00420980600711399 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:43:y:2006:i:7:p:1087-1103

DOI: 10.1080/00420980600711399

Access Statistics for this article

More articles in Urban Studies from Urban Studies Journal Limited
Bibliographic data for series maintained by SAGE Publications ().