Regional fiscal cooperation in metropolitan areas: An exploration

Abstract

This article explores the potential benefits and costs of regional cooperation on metropolitan area fiscal policies. After discussing the relationships between cities and suburbs, as well as the role of local fiscal policies in regional well-being, the article presents and tests a model for measuring benefit spillovers resulting from fiscal policies. The results show that state and local infrastructures have important effects on metropolitan property markets, and that current spending is less influential than the level of public capital in place in determining property values. State highway investments are found to reduce the attractiveness of metropolitan area locations. Enhancements to central city infrastructure are estimated to significantly increase suburban property values, and the results of some simple policy experiments are examined.© 1999 by the Association for Public Policy Analysis and Management.

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