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A Theory of User-Fee Competition

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Author Info
Clemens Fuest ()
Martin Kolmar ()

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Abstract

We develop a two-region model where the decentralized provision of spillover goods can be financed by means of taxes or user fees. In order to enforce the fees regions have to invest in exclusion. We show that a decentralized solution tends to be inefficient. There will be over-investment in exclusion and an underprovision of the spillover goods compared to a centralized solution. In addition the regions have strategic incentives to set user charges. If the regional spillover goods are substitutes user fees tend to be inefficiently low, whereas they tend to be inefficiently high if the spillover goods are complements.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1166.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1166

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Related research
Keywords: public goods; club goods; user fees; fiscal federalism;

Other versions of this item:

Find related papers by JEL classification:
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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  1. Henk C. Kranendonk & Jan Bonenkamp & Johan P. Verbruggen, 2004. "A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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This page was last updated on 2009-12-1.


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