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Endogeneity and Environmental Policy: How Local Institutions Structure Local Demand

IJED, Vol. 4 No. 3, (2002)

One of the central themes of local government in a federalist system is the concept of nested institutions, where local governments operate within an environment of constrained policy options. Recent work in the field of environmental economics has highlighted the difficulties that arise when trying to assess the public’s taste for different policy options when the public’s experience is constrained or limited. Local governments in a federalist system thereby offer a unique environment for examining constrained publics and the problems that may arise when dealing with endogenous policy alternatives. This article draws on the recent literature on local institutions and environmental policy to develop a model for explaining local government behavior, and uses a case to illustrate the model’s application. I conclude that traditional models of policy analysis may require some translation for realistic application to local governments.

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