City spending on economic development versus affordable housing: Does inter-city competition or local politics drive decisions?

Public choice theory predicts that interjurisdictional competition and the need for a strong tax base severely limit local policy making. City decision makers must pursue developmental or economically advantageous policies such as economic development initiatives and avoid redistributive or fiscally harmful policies such as affordable housing programs. Many social scientists object to the deterministic argument of public choice theory and emphasize the importance of politics in the policy making process. Using regression analysis, I investigate the factors that influence cities to pursue a limited strategy as predicted by public choice theory versus a balanced or more progressive approach favoring affordable housing programs over economic development programs. The results show that inter-city competition increases the likelihood cities will pursue a limited strategy versus a balanced or more progressive approach. However, political variables also influence local policy decisions. In fact, this analysis indicates that political factors,are more important than inter-city competition in explaining city policy choices.