Form of Government, Administrative Organization, and Local Economic Development Policy

Abstract

Recent theoretical work has applied transaction cost theories to the public sector. This article extends transaction cost theories of organization to an empirical examination of bureaucratic influences on local government development programs. Extant research has paid little attention to the role that administrative organizations, institutions, and bureaucracies play in the local development process. Administrative organization can shape development choices in two ways. First, form of government may have direct additive effects on development because professional public managers have different orientations, values, and career interests than elected executives. Second, form of government may have nonadditive or interactive effect by influencing levels of government responsiveness to exogenous economic, political, and bureaucratic demands. We estimate the influence economic forces and bureaucratic arrangements had on development program activity in 1989 after accounting for development programs in place five years earlier in the same cities. Our finding calls into question the causal inferences regarding the direct effects of administration on local development policy found in the literature. In addition, we find that the form of government mediates effects of administrative arrangements and economic forces on development policy. In particular, the influences of strategic planning on development policy were evident in council-manager cities, but not mayor council communities. This finding suggests that commitments to take certain actions and not others embodied in strategic plan may be less credible in the context of high power electoral incentives.