Fiscal Fragmentation and the Spatial Distribution of Crime in the United States

Jinghua Lei, Jenny Ligthart, Mark Rider and Ruixin Wang
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Jinghua Lei: School of Finance,Renmin University of China
Ruixin Wang: School of Economics and Management, Harbin Institute of Technology, Shenzhen

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: We investigate the effect of fiscal fragmentation on crime and its spatial distribution among jurisdictions in metropolitan areas in the United States. We begin by developing a positive model of local government provision of public safety, in which fiscal fragmentation influences the provision of public safety through three channels: X-efficiency, interjurisdictional-spillover effects, and Tiebout-sorting effects. Our model predicts that fiscal fragmentation creates an efficiency-equity trade-off in the provision of public safety. To investigate this tradeoff, we estimate several models using U.S. county-level, panel data drawn from a sample of metropolitan areas for census years 1990, 2000, and 2010. Our findings suggest that fiscal fragmentation has a negative effect on the aggregated crime rate in a metropolitan area which we interpret as evidence of an increase in efficiency. We also find that fiscal fragmentation increases the disparities in crime rates among jurisdictions in a metropolitan area. To further explore the underlying mechanisms, we examine interjurisdictional-spillover and Tiebout-sorting effects of fiscal fragmentation in a Spatial-Autoregressive Durbin model with multiplicative spatial interaction terms. Since conventional estimation methods are not suitable for the task at hand, we derive an innovative Maximum Likelihood Estimator for our empirical model. As predicted by the theory, we find strong evidence that both interjurisdictional spillover and Tiebout-sorting effects have a positive effect on the spatial correlation in crime rates among jurisdictions in a metropolitan area.

Pages: 55 pages
Date: 2018-10
New Economics Papers: this item is included in nep-geo and nep-ure
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