State Rules and Local Governance Choices

This article evaluates the impact that states have on local governance decisions. We suggest that when states impose constraints on less politically costly tools for funding local services cities turn to cooperation with other local governments. Cooperation is politically and administratively less desirable than other solutions to the problems associated with fragmentation: diseconomies of scale and jurisdictional externalities. But when states constrain those other mechanisms, the relative merits of cooperation increase. At the margins, more cities should cooperate and cooperate more deeply in such situations. Using a sample of 3,664 cities across 49 states, we find that in three examples of these policy tool tradeoffs, our theory is generally supported.