Fiscal fragmentation and crime control: Is there an efficiency-equity tradeoff?

This article investigates the effects of fiscal fragmentation on aggregate crime rates and the spatial disparities in crime rates among counties in a metropolitan area. We begin by developing a model of local government provision of public safety. The model predicts that fiscal fragmentation creates an efficiency-equity tradeoff. To investigate this tradeoff, we estimate a variety of empirical models using county-level panel data drawn from a sample of metropolitan areas in the USA for census years 1990, 2000, and 2010. Our findings suggest that fiscal fragmentation increases efficiency in the provision of public safety; that is, fiscal fragmentation has a negative effect on aggregate crime rates in metropolitan areas. We also find that fiscal fragmentation increases disparities in crime rates among counties in a metropolitan area. In other words, fiscal fragmentation has a negative effect on interpersonal equity in the provision of public safety. We further explore the underlying mechanisms of the efficiency-equity tradeoff in a Spatial-Autoregressive Durbin model with multiplicative spatial interaction terms. Since conventional estimation methods are not suitable for the task at hand, we derive an innovative Maximum Likelihood Estimator for our empirical model. As predicted, we find evidence of both interjurisdictional spillover effects and Tiebout-sorting effects due to fiscal fragmentation.