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ABTRACT. Theory suggests that the spatial distribution of development within a local jurisdiction affects the costs of providing local public services. We use GINI coefficients to characterize these distributions at the county level and estimate the effects on real per capita expenditures from reductions in the spatial concentration of all buildings and nine alternative types of development. We also estimate the effect on expenditures from expansions in the developed area of a county. The results obtained from a panel of Florida counties confirm our theory and suggest that the geography of development within a county affects public services costs.

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Local governments react to one another in expenditure. However, the existing literature concerning these reactions suffer from one of three problems: timing dynamics, county behaviour, or over aggregation. City‐to‐city interaction estimates are shown to shrink up to 50% when appropriately dealing with dynamics and county behaviour using a dynamic spatial Durbin model with a maximum likelihood estimator. Expenditure disaggregation shows that the majority of categories have no spillover. One category, general government expenditure, is responsible for nearly all of the variation. This finding does not fit well with the existing theories for spatial interaction.

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