Leviathan in the Crosshairs

Following in the spirit of the Leviathan hypothesis, this paper empirically examines how the degree of local government market power influences efficiency in the local public sector. Like studies in industrial organization using the structure, conduct, and performance paradigm, the overall level of concentration in the market area measures market power and the market share of the individual municipality is held constant. In addition, an efficiency measure, aggregate property values, is used in the empirical test. The empirical results suggest that aggregate property values are lower and thus efficiency suffers, in more concentrated municipal market areas, ceteris paribus, thus providing some evidence for Leviathan-type governments.