Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls

By showing evidence of strategic interaction in the choice of growth controls, the paper suggests that important local policy decisions of this type are not taken in a vacuum. When nearby cities impose stringent growth controls, a given city is likely to do the same. When nearby growth controls are mild, the city is likely to adopt mild controls as well.
The model suggests that policy interdependence arises because a city’s growth control decision is sensitive to the tightness of the regional housing market, which depends on the control choices of other cities. It is important to note that, while the results provide evidence of interaction, they do not prove that this particular mechanism is the source of it. For example, cities could instead be naive followers of localized policy “fads” in a setting of generalized hostility toward growth, which would generate results like those that have been found. Further research is needed to settle this issue.

Jan K.Brueckner

Journal of Urban Economics

November 1998

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