The Adoption of Constitutional Home Rule: A test of endogenous policy decentralization Jessica Hennessey PhD Candidate University of Maryland

Research Question Why did some states grant constitutional home rule provisions to municipalities in the late 19 th and early 20 th century? Home rule: Municipality can independently enact, adopt and amend charter Hypothesis: States with more heterogeneous local preferences are more likely to decentralize control by granting home rule

Motivation Provide empirical evidence of policy decentralization Understand origins of institution so we can better evaluate its effects Role of heterogeneity within communities Historical importance in transition from state to local government

Approach Step 1: Observe differences in municipalities –In home rule states versus in non-home rule states –Within home rule states: adopt home rule charter or remain under general legislation Step 2: Estimate municipal-level latent taste for home rule (use data from home rule states) Step 3: Compare predicted municipal preferences in home rule states to predicted municipal preferences in non-home rule states

Municipal Decision: Home Rule or General Legislation Organization under General Legislation –Set by state legislature, uniform for all municipalities –Common features: Structure (example: one mayor, 5 trustees) Elections (frequency, number of wards) Powers Debt and tax limitations (shared by Home Rule municipalities) Home Rule –Ability to draft and adopt own charter –Formal recognition of local self-determination –Features of charters Governance structure Facilitate ownership and operation of public utilities Initiative, referendum, recall Impose more stringent tax and debt limits

Who Adopts a Home Rule Charter Three primary factors: size, growth, and infrastructure investment Degree of homogeneity/heterogeneity –Alesina and La Ferrara (2000) –Buchanan and Tullock (1962) Different from average municipality in state (general legislation not appropriate)

Data Available Year of charter adoption –11 Home Rule States –For first home rule charter –Information up until 1935 Municipal level –Wealth, Debt and Taxation from Census –Population, Gross Debt less Sinking Fund, Sinking Fund Assets –1890, 1902: all municipalities –1913, 1922, 1932: municipalities >2500 County level –ICPSR 2896: Native born population, urban population –ICPSR 8611: Congressional election results % Democrat, % Other Political HHI:

Home Rule versus Non Home Rule States 1890 Data for use in Probit Estimation

In HR States: Home Rule versus General Legislation 1890 Data for use in Probit Estimation

Econometric Specification Cross-section (1890) estimation Panel data estimation Covariates –X ics : population, population growth, gross debt less sinking fund per capita, sinking fund assets per capita –Z cs :% native-born, political HHI, % Democrat, % Other –V ics,cs : population growth, % native, gross debt less sinking fund per capita, political party –S s : state fixed effects –Y t :time effects Assumption: decisions are independent

Results on 1890 Data

Results on Panel Data

Duration Model Likelihood Function Where Specification Same X as used in probit model, include state effects

Duration Results

Comparing Municipalities Use estimates to generate predictions for municipalities in Home Rule states and Non- Home Rule states –Probit: probability of adopting HR charter –Duration: probability of survival (not adopt HR charter by 1935) How to quantify heterogeneity of preferences –Strength of preference –Variance

Summary of Results

Conclusion States that adopted home rule have greater heterogeneity in estimated municipal preference for home rule than states that did not adopt home rule Contribution –Empirical evidence of policy decentralization –An explanation for institution of home rule –Unique municipal-level dataset Future work –Laboratory federalism: empirical exploration with a spatial/geographic component –Political economy: effects of HR –How does HR relate to other facets of the state-local relationship, such as the evolution of tax structures