Abstract
This paper empirically examines the formation of special districts in the United States. It investigates, in particular, the adoption of tax and expenditure limitations (TELs) on local governments to determine how the have motivated special district formation. The paper extends the research agenda by reporting a longitudinal analysis for TELs and special district formation through the post-Proposition 13 tax revolt in the states. Theory from the literatures on special-purpose governments and, on TELs, guides the research – literatures interested in the impact of fiscal institutions on local government reorganization. Main findings are that adoption of one type of TEL – general limitations – is encouraging formation of special districts with taxing powers. Substantively, adoption of general limitations raises the number of taxing districts by approximately 13 percent. A flexible model for panel data, inclusive of fixed effects and time trends, turns out to be crucial for identifying estimates for the impact of TELs in special district formation.
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