Piling on: Multi-Level Government and the Fiscal Common-Pool
Christopher R. Berry
University of Chicago - Irving B. Harris Graduate School of Public Policy Studies
This paper discusses the common-pool problems that arise when multiple territorially overlapping governments share the authority to provide services and levy taxes in a common geographic area. Contrary to the traditional Tiebout model in which increasing the number of competing governments improves efficiency, I argue that increasing the number of overlapping governments results in "overfishing" from the shared tax base. I test the model empirically using data from U.S. counties and find a strong positive relationship between the number of overlapping jurisdictions and the size of the local public sector. Substantively, the "overlap effect" amounts to roughly 10 percent of local revenue.
Number of Pages in PDF File: 46
Keywords: overlapping jurisdictions, special districts, Tiebout, concurrent taxation, tax competition
JEL Classification: H11, H2, H71, H77, H73
Date posted: June 16, 2008