Municipal competition for inhabitants under population decrease

The shrinking population during the break-down, adaptation and recovery phase in Estonian social and political development enforces municipal competition among the municipalities. Competition for inhabitants is embedded in regional competition showing horizontal and vertical competition relations. Inhabitants’ competition prevails indirectly through municipal business promotion competition and directly through competition for inhabitants. The competition shows three phases. A phase concerns zoning and long-term planning; a second one refers to negotiations with settlement firms and short-term actions to attract inhabitants followed by a phase of revisions of zoning and measures.

The oligopolistic industrial zoning model of business promotion policy points to the consequences of horizontal municipal competition also on population. Vertical influences on business promotion policy demonstrate a game-theoretic example of intergovernmental intervention from higher government on zoning. The negotiation phase in business promotion policy is modelled by a bilateral monopoly model between a municipality and a settlement firm. Horizontal regional competition highlights the implications on inhabitants’ competition. An oligopoly model of direct inhabitant competition concerns the zoning in particular for housing. Furthermore, a model of public enterprise service and fee formation and of horizontal public firm competition shows inhabitants’ competition in the second phase.

Forms of inhabitant competition concerning suburbanisation and using public debt, revenues such as taxes, fees and expenditures are mentioned. Finally, follows a discussion of possible instruments to regulate inhabitant competition.