Too Many Cooks in the Kitchen? Local Government Fragmentation and Economic Growth

In the US, the 49 largest metro regions account for more than 70% of GDP. Large metro regions are, and will continue to be, the centers of US growth and prosperity. Therefore, it is important to determine how to govern metro regions to ensure their continued economic success. Do united metro region governance structures result in better spending policies oriented towards long-term economic growth, or, do fragmented metro regions prosper because local government competition fuels more effective spending policies? By looking at metro region unity, local government spending policies, and the economic growth of the 49 largest US metro regions, I find that united local government is better for economic growth. In united regions, local governments face less pressure from neighboring municipalities to compete for people and firms in the short-term. This allows municipalities in united regions to engage in less short-term consumption spending designed to lure consumer-voters from neighboring municipalities, resulting in improved economic growth prospects for the entire region. These conclusions suggest that to encourage economic growth in our large metro regions, we should pursue governance structures at the metro region level, rather than the village, town, city, or county level.