Abstract
M UCH analytical effort has been devoted in recent years to the normative economic analysis of the optimal structure of government, especially with reference to urban areas. This literature has developed along several lines. The possible presence of economies of scale from larger units of government forms a prominent part of this literature.1 Another strand of this literature examines the welfare consequences of independent decision making by units of local government, when those decisions affect residents of other units of local government.2 A third approach deals with the ability of a system with many governments to accommodate variations in individual preferences more fully than is possible in a single unit of government.3 While this third ap-
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