Schriftenreihe/Nr.:
46th Congress of the European Regional Science Association: "Enlargement, Southern Europe and the Mediterranean", August 30th - September 3rd, 2006, Volos, Greece
Zusammenfassung:
This paper aims at presenting a simple model of local decision-making based on the hypothesis of monopoly power on the part of local governments. It adds the contribution of the principal-agent theory by assuming that: (a) monopolistic behavior is constrained by voters' efforts to monitor the outcomes of policies; (b) local governments' policies affect local property values. Given those assumptions, the degree of capitalization of property taxes is shown to determine the incentive for voters' control over policies' outcomes.