Interjurisdictional Competition and Urban Area Fragmentation

Abstract

The collective action problem in political science examines the circumstances under which groups can be successfully formed and maintained. While earlier generations of political scientists believed that groups developed in democracies because of the nature of democratic culture and procedures, Mancur Olson (The Logic of Collective Action, 1965) demonstrated that free-riding doomed many attempts at collective action unless selective benefits were granted to members--hence automobile association members receive free travel services, for example. Subsequent theories posited other reasons for successful collective action, such as communication, leadership and anticipated returns from joining.

Tests of these hypotheses have taken place primarily in laboratory experiments. This study conducts a real-world natural experiment, examining interjurisdictional competition (IJC)--a government's offer of incentives for businesses to locate within its environs as opposed to the territories of others--in the setting of urbanized areas of various degrees of fragmentation (political organization as one, several or many local governments). If the free-rider hypothesis is true, IJC would increase with higher fragmentation.

As the "free-rider" title suggests, IJC has been portrayed in game theory as a prisoners' dilemma. However, more detailed analysis in this study reveals several possible games, each posing a related collective action problem.

Methodologically, additive indices from a nationwide survey of economic development practices measure the intensity of IJC effort. Urban area fragmentation is represented by indices using the Hirschman-Herfindahl Index method. The major hypothesis--IJC is a function of fragmentation--is analyzed using OLS regression.

The regressions refute the free-rider hypothesis. The statistical analysis then examines the subsequent explanations of collective action. Anticipated returns cannot be substantiated; however, civil society-based indicators show communication and leadership to be causes of successful collective action.

Finally, a case study of Hampton Roads (the Virginia Beach-Norfolk-Newport News, Virginia metropolitan area) provides a historical narrative of the efficacy of communication and leadership in successful collective action as well as a possible example of game transition from the prisoners' dilemma to an assurance game.