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Local Public Good Provision, Municipal Consolidation, and National Transfers

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Author Info
Robert Dur ()
Klaas Staal ()

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Abstract

We analyze a simple model of local public good provision in a region comprising two districts, a city and a village. When districts remain autonomous and local public goods have positive spillover effects on the neighboring district, there is underprovision of public goods in both the city and the village. When districts consolidate, underprovision persists in the village (and may become even more severe), whereas overprovision of public goods arises in the city as urbanites use their political power to exploit the villagers. From a social welfare point of view, inhabitants of the village have insufficient incentives to vote for consolidation. We examine how national transfers to local governments can resolve these problems.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2061.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2061

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Related research
Keywords: local public goods municipal consolidation voting intergovernmental transfers tax discrimination

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Find related papers by JEL classification:
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
R50 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - General

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