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ABSTRACT: This article presents a “second-generation ” rational choice explanation for voluntary regional governance. It identifies the interests that motivate interlocal collaboration and argues that voluntary agreements emerge from a dynamic political contracting process in which benefits exceed the transaction costs of bargaining an agreement. Explanations are presented for how specific community characteristics and formal and informal institutional arrangements reduce transaction costs of information/coordination, negotiation, enforcement, and agency. Based on the logic of this framework, sets of propositions are presented regarding how these contextual factors influence the transaction costs of cooperative actions. Evidence supporting these propositions is reviewed, followed by a discussion of implications of this second-generation rational choice theory for the study and practice of regional governance. To what extent can voluntary cooperation and coordination among local governments provide solutions to regional problems confronting metropolitan areas? Debate between advocates of centralized versus decentralized systems of urban government has defined the study of local government for four decades. The first rounds of this contest focused on the ability of decentralized units to efficiently respond to the demands of citizens within their boundaries (Lowery, Lyons,
Richard C. Feiock (Thu,) studied this question.