Territorial Review Copenhagen - Region Hovedstaden

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institutional proxies of community, such as group participation, have been
shown to explain higher economic performance. Conversely, excessive
divisions within societies limit their growth potential (see Rodriguez-Pose
and Crescenzi, 2008). Kaufmann et al. (2005) find that governance is
significantly associated with public service performance, both for local and
global cities. Well-governed cities perform better than poorly governed
cities across all quality and access to service variables. Chapter 3 of this
Review focuses on urban governance in Copenhagen.
There is a trade-off between competition and co-ordination in regions.
Decentralisation provides regional and local authorities with the possibility
to compete with each other; this can create diversity and responsiveness to
local preferences. Co-ordination makes it possible to internalise interjurisdictional
externalities that are increasingly important in a regionalised
world. According to the different public functions, more or less coordination
might be required. In some areas, such as economic development
policy, the benefits of competition seem to outweigh the benefits of coordination.
In other areas, like transportation, there are massive externalities,
and regional co-ordination is extremely important. For housing policy, a
mixed system might have value, in which localities would maintain control
over land use decisions, but regions would provide incentives to induce
localities to make the right choices (Glaeser, 2007).
Fiscal conditions have an impact on urban competitiveness. Using data
available for 103 local government authorities in Israel, Carmeli (2007)
found that local authorities that were fiscally healthier in 1997 and 1998
enjoyed better education and employment systems in 2001. He finds that the
capacity to generate revenues is by far more critical than budgetary surplus
or deficit. He suggests that fiscal health results in better-quality schools, not
only because fiscally healthy governments can invest more resources in their
education and employment systems, but also because they are able to attract
more educated residents with higher demands and businesses seeking
qualified people. Gyourko and Tracy (1989) found that variation in local
fiscal conditions appears to be a key determinant of inter-metropolitan wage
differences. Fiscal differences explain roughly the same amount of the
variation in mean wages across cities as do differences in worker traits on
differences in major industry/occupation classifications. In another study,
Gyourko and Tracy (1991) find that fiscal differentials are nearly as
important as amenity differentials in determining the quality of life across
urban areas. The mean absolute dollar differential in taxes represents
USD 603, with a standard deviation of USD 527.