Fiscal Fragmentation and Crime: Is There an Efficiency and Equity Tradeoff?
Jinghua Lei, Jenny Ligthart, Mark Rider, Ruixin Wang
This paper investigates the effects of fiscal fragmentation on both crime rates and the spatial disparities in crime rates among jurisdictions. We begin by developing a positive model, as opposed to a normative one, of local government provision of public safety, which predicts that fiscal fragmentation creates an efficiency-equity tradeoff in the provision of public safety. To investigate this tradeoff, we estimate a variety of models using county-level panel data drawn from a sample of metropolitan areas in the U.S. for census years 1990, 2000, and 2010. Our findings suggest that fiscal fragmentation has a negative effect on the aggregate crime rate in a metropolitan area. However, we also find that fiscal fragmentation increases disparities in crime rates among jurisdictions in the region. We further explore the underlying mechanisms in a Spatial-Autoregressive Durbin model with multiplicative spatial interaction terms. Since conventional estimation methods are not suitable for the task at hand, we derive an innovative Maximum Likelihood Estimator for our empirical model. As predicted, we find evidence for both interjurisdictional spillover effects and Tiebout-sorting effects caused by fiscal fragmentation.
Fiscal decentralization, Crime, Spatial econometrics