Public Goods Provision with Self-Selected Types of Government: An Empirical Analysis of Local Government Behavior

Explaining why the provision of public goods varies across jurisdictions is often complicated by the self-selection of jurisdictions into the population with provision authority. To address this problem we develop and estimate a multi-stage selection model in tandem with a public goods provision model. Our empirical application is to the State of California where counties are assigned primary responsibility for the implementation of an important environmental regulation. Municipalities may assume responsibility for implementation, but only if counties grant them authority. Selected municipalities were observed to inspect at twice the rate of their surrounding counties. We show this difference is due to the dual selection process rather than to characteristics of municipalities in general. Moreover, proposals to extend regulatory authority to additional municipalities would actually have the un-intended effect of lowering statewide inspection rates.