Did local government structure kill small town America?

This article examines the provision of public goods in an urban area and the effect voting has on the level and location of amenities throughout a city. It is particularly appropriate for small communities that must finance economic development projects with limited funds. The work presented is a result of working with rural communities throughout America that have seen their historic downtowns deteriorate as big box retail grows on the urban fringe. I find this shift in community development may be a result of the way local economic development is financed and projects are decided upon. Specifically, I find significant welfare losses associated with voting for a public good in space. Small public projects that would lead to community-wide welfare improvements are always under-provided, amenities from any public good provided exceed the social optimum, and amenities throughout the city are inappropriately located. Urban amenities refer to city parks, libraries, recreation and cultural centers, museums, landscaping, and other goods that are publicly provided for the enjoyment of residents. Parks and recreation centers serve as extended backyards, community gathering places, and wildlife habitat. Cultural centers and landscaping enhance local neighborhoods and are used as a gauge of a community's quality of life. Often these amenities are created by public referendum or by public servants acting on behalf of the community, presumably as if there was a referendum, and, once created, are financed through property taxes spread evenly across the community. The benefits of urban amenities, however, do not accrue evenly across a community. They create a spatial externality in the sense that residents living nearer the public good benefit more than a resident living across town. This introduces two opposing forces in the decision of public good location. There is pressure for amenities to be created where access is highest and spillovers are largest; however, such land is typically more expensive, leading to a higher tax burden.

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Conference Paper/ Presentation
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JEL Codes:
R10; R14
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Selected Paper

 Record created 2017-04-01, last modified 2018-01-22

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