District Representation, Economic Development, And The Law Of N/1:

District Representation, Economic Development, and the Law of 1/N: How Constituency Diversity Shapes Policy Choices

Richard C. Feiock & Hyung-Jun Park

Askew School of Public Administration and Policy Florida State University Tallahassee, FL 32306 [email protected] District Representation, Economic Development, and the Law of 1/N: How Constituency Diversity Shapes Policy Choices

The policy choices of legislative bodies have been linked to the number of legislative districts into which a jurisdiction is divided. The divisibility of benefits and costs across districts gives rise to the overproduction distributive programs that provide geographically specific benefits. Legislative decision-making under majority rule and district representation can lead to situations similar to a common pool resource problem because legislators view the tax base as a common pool from which to finance constituent-specific projects. Constituent groups internalize all of the benefits of district specific projects that their legislators propose, while they internalize only a fraction of the requisite costs imposed on the whole economy. Weingast,

Shepsle, and Johnsen (1981) formalized the inherent inefficiencies associated with dividing the economy into n electoral districts. The "law of 1/n" posits that a district’s tax share is a declining function of the number of districts, thus, fiscal inefficiency and the production of distributive goods increase with the number of electoral districts (Weingast, Shepsle, and

Johnsen 1981:654).

While a greater number of districts may increase the incentives of individual representatives to pursue distributive policy, we contend that this incentive may be constrained by diversity of electoral constituencies both within districts and across districts. Constituency diversity alters the political calculus associated with distributive politics. For example, changes in constituency diversity that resulted from state redistricting significantly affected the provision of pork barrel projects by state legislatures (Crain, 1997). Extant research on distributive politics has focused on spending for distributive functions but has not examined choices to use

1 distributive programs rather than alternatives that do not geographically concentrate benefits.

The analysis presented here extends Crain’s work on state level spending patterns to examine how choices of economic development policy instruments by city council members are affected by the scope of district representation and by district diversity. By utilizing survey data from a large cross-section of city council members we are able to examine the consequences of districts and diversity for individual legislators’ preferences for distributive programs as well as collective choices for development programs with divisible benefits. We expect social and economic diversity within and among districts to condition the distributive biases of development policy.

Distributive Politics and Economic Development

Distributive policy, defined as "a political decision that concentrates benefits in a specific geographic constituency and finances expenditures through generalized taxation" (Weingast,

Shepsle, and Johnsen 1981), characterizes much of what local governments do. Neverthless, extant work on distributive policy has focused on national and, to a lesser extent, state legislatures, to the neglect of city councils. Paul Peterson (1981) has argued that local politics is dominated by development policy which is supposed to work for the betterment of the “city as a whole,” even if the immediate and direct beneficiaries are only a small number of firms and individuals. Some approaches to local economic development provide benefits to the entire community, but many of the development activities of local government direct benefits to specific geographic constituencies. Moreover, it is often alleged that the development incentives and the growth they encourage ignores or actually harms certain areas of a community.

Economic development may then be bought at the price of disrupted neighborhoods, displaced families, and burdened taxpayers whose taxes must pay for subsidies that a small number of

2 privileged firms enjoy (see, e.g., Logan and Molotch 1987). Often the benefits of economic development programs are parceled out to particular geographic locations or subunits of the population. Recent work has demonstrated that local representatives often supported development policy efforts in order to target benefits to select constituencies (Clingermayer and

Feiock, 1995).

Cox and Tutt (1984) observed universalistic behavior in Los Angeles County government in the allocation of intergovernmental revenues. Clingermayer (1993) extended this perspective to examine the adoption of zoning ordinances and focused on the geographic nature of representation in cities and counties. Communities containing ward or district electoral representation systems are presumed to favor the sort of geographic targeting that distributive policy-making exemplifies. Jurisdictions lacking this form of representation, such as those cities that use at-large elections exclusively, should be expected to engage in much less distributive policy-making.

District Diversity and "The Law of 1/n"

The presence of constituent-specific (non-general) benefits tied to economic and demographic diversity underlies the common pool problem in local governance. Opportunities to gain differential advantage at the expense of fellow participants would not arise if project benefits are distributed equally throughout the community and the output financed by taxation that are also equally distributed. A system of representative democracy with geographically defined constituencies is particularly susceptible to the common pool problem.

Distributive policymaking presumes geographically-defined constituencies that are fairly small relative to the entire polity. Because city governments with ward-based representation

3 share this characteristic, the policymaking process is expected to follow law of 1/n such that the production of targeted policies will be a function of the number of district into which a city is divided. In cities with at-large systems representation legislators have different incentives and targeting policy benefits to specific locations, thus the distributive policymaking argument should therefore be less applicable. Development programs with distributive consequences should be less attractive and less likely to be adopted under at-large representatives.

Under a district-based electoral system, public officials can advance their electoral interests by providing their constituencies with particularized, targeted benefits financed by a broader constituency. Since benefits are concentrated and specifically targeted, legislators can easily claim credit for them. Yet because costs are diffused across all constituencies, legislators can easily duck blame (Mayhew 1974). As a result of these incentives, legislators are encouraged to support inefficient programs (Ferejohn 1974).

Local Legislators and Their Constituencies

Several urban scholars have investigated the relationship between local legislators and their districts (see, e.g., Davidson 1979; Heilig and Mundt 1984; Denzau and Munger 1986;

Welch and Bledsoe 1988). Denzau and Munger (1986), suggest that constituency diversity can greatly influence the activities of elected representatives. Clingermayer and Feiock’s (1993;

1994) found that campaign support for council members from homogeneous districts was linked to interests from within the district, while members from more diverse districts acquired greater support and resources outside their districts. Members with more homogeneous districts were also more likely to engage in case work activities than members representing economically and demographically diverse districts.

4 Extending this logic to local development choices, one would expect to find representatives of homogeneous constituencies to be responsive to geographically based interests as predicated by distributive models of district representation. These “territorial interests (Clarke

1987) might include neighborhood organizations, homeowners associations, and unorganized interests and individuals located within their geographically defined constituencies (see, e.g.,

Kenyon 1980). For example, legislators with homogeneous districts are likely to be active in defending neighborhoods from what local residents perceive to be outside threats from development and promoting development programs with particularistic benefits.

On the other hand, in more heterogeneous constituencies--including whole communities in the case of at-large representatives–elected leaders should also be attentive to groups that have less clear-cut connections to geographic interests. These groups may be defined along functional or occupational lines, such as public employee unions, developers, construction trade unions, and various interests favoring growth and development. Legislators responding to functionally defined interests should be more concerned with aggregate economic growth and employment concerns, and purse these goals through national promotion and advertising campaigns and various public subsidies for private investors.

A Model of Distributive Politics with District Diversity

Using the exposition of the distributive hypothesis provided by Crain (1997) let b (xi ) stand for the benefits of targeted program spending in district i to the constituents of legislator i, and let c(x) stand for the associated costs imposed on the whole community. The efficient level of spending in district i is the x that solves b'(xi ) = c'(xi ). Given n districts and an equal distribution of the tax burden across districts, the constituents of legislator i bear only (1/n)th of

5 the project cost in district i. The legislator thus seeks spending for his or her district up to the point where b'= (1/n)c'. Assuming the norm of universalism where legislators logroll and defer to each other, total spending increases with the number of districts (Weingast, 1979).

Diverse constituencies cause special problems for representatives because they tend to make conflicting demands. The effect of constituent diversity across districts follows from modifying the above notation slightly. Let b (xi ) = b1 (xi ) + b2 (Xi ), where b, (xi ) stands for the benefits to constituents residing in district i and b2 (Xi ) stands for the benefits to constituents residing in districts other than i (i.e., consumption externalities). Weingast et al. (1981) argue that a universalistic representative legislature is biased towards projects with high type b1 benefits because a system with district-oriented electoral incentives fails to internalize type b2 benefits.

The configuration of districts affects constituent preferences within a district. The influence of district diversity on distributive policy results from the costs of coordinating legislative transactions, for example the time and effort required to negotiate vote trades with other legislators and to monitor and enforce agreements (Crane, 1997; Horn, 1998). Where constituencies are homogeneous across districts, there are more likely to be single types of development policy that can be distributed universally with little transaction cost with each council members district receiving some benefit. Intra-district differences create different policy priorities and therefore the need to log roll across programs (Weingast, Shepsle, and

Johnson 1981: 651). A series of log-rolling agreements result in which minimum winning coalitions form over a number of development and other programs to approve projects favoring their districts (Buchanan and Tullock 1962).

Legislative transactions costs are higher for projects yielding district-specific benefits

6 than for projects yielding generalized, or multi-district benefits. In terms of the notation introduced above, proposed projects yielding generalized benefits (b1 = b2 > 0) require minimal quid pro quo negotiating to attain consensus. Further, generalized projects do not entail enforcement and monitoring costs because legislators benefit in equal measure from the single project. The additional transactions costs (negotiating, monitoring, and enforcing logrolling agreements) come into play for proposed projects that yield district-specific benefits (b2 = 0).

This relative cost difference deters projects with district-specific benefits despite the obvious electoral payoff for such projects (the 1/n effect). The Weingast et al. (1981) model does not account for transactions costs differences associated with generalized versus district-specific projects in concluding that district representation creates a bias against programs with type b2 benefits. Consideration of transactions costs at least partially offsets the incentive to under-produce programs yielding generalized benefits (Crane, 1997).

Intra-district diversity is equally important if not more important to the size of a legislator's electoral payoff from a district-specific project. Again let b1 stand for the benefits to constituents residing in district i for spending x dollars on a given project. The value of b1 depends on the number of constituents residing in district i who share a common preference for the project. Thus, the size of the payoff to legislator i (linked to the value of b1) increases as the preferences of constituents residing in district i become more homogeneous. Legislative institutions such as the committee system reduce the transaction costs of logrolling (see

Weingast and Marshall, 1988). However, transaction costs remain positive, and the argument here relates to the relative costs of legislation conveying district-specific benefits versus legislation conveying generalized benefits. Crain (1997) extends the Weingast et al. model to incorporate the transaction costs that result from district heterogeneity. Formally let p stand for

7 the fraction of the district's constituents that actually benefit from a spending program, where p decreases with the amount of constituent diversity. The benefit of spending becomes pb1 (xi) and the cost is (1/n) c (xi ). The first-order condition is then: pb 1 ' (xi (1 In) c' (xi or put differently b1 '= (1/pn) c'. This extension produces the "law of 1/pn," where p measures the homogeneity of constituent policy preferences within a district (p is an inverse measure of intradistrict diversity).

When all constituents are identical, p = 1, and this formulation reduces to the law of 1/n.

The legislators political calculus regarding projects with district-specific benefits weighs the marginally higher transaction costs against the marginally higher benefits of seeking a district-specific project. A homogeneous constituency presents this trade-off in the most favorable terms for district-specific projects; a diverse constituency presents this trade-off in the least favorable terms. For example, a diverse legislative district that consists of both pro-development and anti-development coalitions, reduces the number of beneficiaries for a district-specific project such as an industrial park. The representative would shift at the margin toward seeking fewer district-specific projects that require high transaction costs, in favor of programs that generate multi-district projects that require lower transaction costs. Programs such as development advertising and promotional activities with geographically diffuse beneficiaries might be an appealing alternative when districts contain diverse constituencies.

Design and Analysis

The data for this analysis are derived from a mail survey of city council members in U.S. cities (Clingermayer and Feiock, 1995). Council members were asked a battery of questions regarding their attitudes regarding economic development in their communities as well as the activities of their city’s government. The survey instrument also collected information on

8 whether representatives were elected by district or at-large. Those members elected by district were then asked to assess the economic and racial diversity of the district they represented. In order to estimate the level of income within the ward or district constituencies, respondents from those constituencies were asked to indicate on a five-point scale how their ward or district compared to the rest of the city in terms of income. Those same respondents were asked to use a three-point scale to rank their constituencies in terms of the diversity of income. No diversity measure was used for the at-large representatives, but income level at-large was measured as

1980 per capita income for the city as a whole. The survey instrument also asked which groups had supported the council members in their last election. Those surveyed indicated campaign support from six different groups or interests (civic organizations, neighborhood organizations, labor unions, political parties, local businesses, and minority groups) diversity of campaign support was again measured as the number of different groups and interests that respondents indicated were “very important” in their last election.

The dependent variable is the use of geographically targeted vs. non-targeted development programs. The survey identified the use of specific policy instruments for promoting economic development and individual representatives support for the use of each instrument.

9 The policy instruments available to local government officials vary along a number of dimensions (Clingermayer and Feiock 1990; Rubin and Rubin 1987). Recent work has focused on the degree to which the cost or benefits of development policies are targeted to specific constituencies (Clingermayer and Feiock 1995; Feiock and Tao, 1999; Tao, 1999). Some of the most popular local development instruments in the 1980s and 1990s vary according to the degree that they are geographically targeted.

10 References

Alesina, A. and R. Perotti, 1996, "Fiscal Discipline and the Budget Process," American Economic Review, 86 (2), pp. 401-407.

Alt, J.E. and R.C. Lowry, 1994, "Divided Government, Fiscal Institutions, and Budget Deficits: Evidence from the States," American Political Science Review, 88, pp. 811-828.

Buchanan, J.M. and G. Tullock, 1962, The Calculus of Consent, Ann Arbor: University of Michigan Press.

Clingermayer, James C. 1993. "Distributive Politics, Ward Representation, and the Spread of Zoning," Public Choice 77: 725-738.

Clingermayer, James C. and Richard C. Feiock. 1995. “Distribution and Redistribution in Economic Development: City Council Member Support for Targeting of Economic Development Policy Benefits," Journal of Politics 57: 508-520, 1995.

Clingermayer, James C. and Richard C. Feiock. 1994. “Campaigns, Careerism and Constituencies: Contacting of City Council Members about Economic Development," American Politics Quarterly 22: 453-468, 1994.

Clingermayer, James C. and Richard C. Feiock. 1993. “Constituencies, Campaign Support and Council Member Intervention in City Development Policy," Social Science Quarterly 74:199- 215.

Collie, M., 1988, "The Legislature and Distributive Policy Making in Formal Perspective," Legislative Studies Quarterly, Vol. 13, p. 427.

Crain, W. Mark. 1997. "District, Diversity, and Fiscal Biases: Evidence from the American States," paper presented at the annual meeting of the Southern Economic Association.

Crain, W.M. and N.V. Crain, Forthcoming, "Fiscal Consequences of Budget Baselines," Journal of Public Economics.

Crain, W.M. and T.J. Muris, 1995, "Legislative Organization of Fiscal Policy," Journal of Law and Economics, October 38, pp. 311-333.

Denzau, Arthur. T. and Wcingast, Barry .R. 1982. The political economy of land use regulation. Urban Law Annual 23: 385-405.

Feiock, Richard C. and James Clingermayer. 1992. “Development Policy Choice: Four Explanations for City Implementation of Economic Development Policies," American Review of Public Administration 22: 49-65.

11 Feiock, Richard C. and James Clingermayer. 1990. “The Adoption of Four Economic Development Policies in Large Cities," Policy Studies Journal, 18: 539-52.

Ferejohn, John .A. 1974. Pork barrelpolitics. Stanford: Stanford University Press.

Fitts, M. and R.B. Inman, 1992, "Controlling Congress: Presidential Influence in Domestic Fiscal Policy," Georgetown Law Review, Vol. 80 (5), pp. 1737-1785.

Gilligan, T.W. and J.G. Matsusaka, 1995, "Deviations from Constituent Interests: The Role of Legislative Structure and Political Parties in the States." Economic Inquiry, pp. 383-401.

Inman, R.P. and M. Fitts. "Political Institutions and Fiscal Policy: Evidence from the US Historical Record." Journal of Law, Economics, and Organization, Vol. 6, 1990, pp. 79-132.

Poterba, J.M., 1996, "Budget Institutions and Fiscal Policy in the US States," American Economic Review, 86 (2), pp. 395-400.

Tullock, G., 1959, "Some Problems of Majority Voting," Journal of Political Economy, Vol. 67, pp. 571579.