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“promises to dampen . . . competition for investment” (p. 25). At the same time, federal devolution shifts responsibilities to the local level, potentially stoking the fire of competition. Globalization has resulted in cities competing for foreign direct investment (Eisinger, 1988; Rondinelli, Johnson, & Kasarda, 1998).

Although some scholars of urban policy may revile the economic determinism of the city limits explanation, others find empirical support for the theory or implicitly accept its premise by consid- ering the effects of intercity competition (Blair & Kumar, 1997; Fisher & Peters, 1998). Moreover, even the toughest critics acknowledge the persistence of city self-interested behavior in the local- policy-making process. For example, Clarke and Gaile (1997) noted “many cities balk at discard- ing the city limits story of a unitary interest in economic development” (p. 36).

The city limits story is troublesome to many policy scholars in theory and practice. In practice, research has shown that competition often results in inefficient and inequitable outcomes for cities and their populations. In fact, research has suggested that many economic development approaches simply cannot be justified on economic terms (Wolman, 1996). Furthermore, research- ers have raised concerns about the beneficiaries of the gains from economic development programs (Reese & Fasenfast, 1997).

Criticisms of the city limits story, the changing context of local economic development, and questions regarding policy outcomes prompt a reassessment of the city limits story as an explana- tion for support of economic development by cities. This research investigates local economic development in a representative cross section of U.S. cities. Specifically, the purpose of our analy- sis is to determine the factors that influence the support of economic development by cities. We use regression models with intercity competition, needs, and political factors as explanations for local economic development support. The data are from a 1996 mail survey of city economic develop- ment staff in a probability sample of U.S. cities with a population of 25,000 or more, supplemented with 1990 and 1992 data from the U.S. Census Bureau.

This introductory section is followed by a literature review of theoretical and empirical studies concerning city policy making. The third section discusses the research methodology, the data, and the study variables. In the fourth section, we describe the analysis and present and discuss the results. Finally, we summarize our findings and conclude with the implications of our results.


Public choice theorists argue that local officials act in the city’s economic interest and compete with other localities for economic benefits. As a result, local officials pursue developmental poli- cies with a dogged single-mindedness. This policy approach further promotes interjurisdictional competition between cities and embeds competition into the workings of the local policy process. Many policy scholars reject the structural determinism of the public choice perspective and iden- tify political factors as shaping the local policy-making process. These competing explanations have been applied to a wide variety of city policy-making studies, including investigations of the support for local economic development.

Public Choice Theory

The city limits story began with a seminal piece written by Charles Tiebout (1956). Using a set of highly restrictive assumptions to bound his argument, Tiebout developed a public choice theory concerning individuals’ locational decisions and public goods. He argued, “The consumer-voter may be viewed as picking that community which best satisfies his preference pattern for public goods” (p. 418). If the community fails to satisfy the preferences of the individual, he would move to another locality. Tiebout concluded his theoretical analysis by stating, “Local government repre- sents a sector where the allocation of public goods (as a reflection of the preferences of the popula- tion) need not take a back seat to the private sector” (p. 424). In other words, local population patterns reflect individual preferences for public goods similar in operation and result to the market for private goods.

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