How to organize secondary capital city regions: Institutional drivers of locational policy coordination

Abstract

We analyze locational policy coordination in the metropolitan regions of secondary capital cities. Secondary capital cities—defined as capitals that are not the primary economic city of their nation states—serve as the political center of their nation states; however, they must simultaneously explore new ways to develop their own regional economies. Locational policies, and their regional coordination, aim to strengthen the economic competitiveness of metropolitan regions. Our comparison of the metropolitan regions of Bern, Ottawa–Gatineau, The Hague, and Washington, D.C., reveals that vertical institutional fragmentation, together with high local tax autonomy, create an unlevel playing field, which prompts jurisdictions to behave fiercely in regional tax competition. These findings are troubling for secondary capital cities given their propensity to be located in fragmented metropolitan regions and the capital city‐specific local tax autonomy constraints imposed on them.