Influence Costs in the Provision of Local Public Goods
AbstractThis paper studies federalism in a "menu auction" or common agency setting where influence costs depend on the heterogeneity of preferences over allowed policies. Though localized provision and uniformity constraints may preclude efficient policies, they reduce influence costs and may enhance welfare. Thus, the much-criticized, commonly-assumed uniformity restriction on central governments finds justification. Localized provision may be optimal even in the presence of spillovers. Higher spillovers from a jurisdiction reduce the welfare of its residents under local provision and have ambiguous effects under centralized provision. Uniformity constraints are better when individuals are mixed; local provision is complementary to sorting.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 01-02.
Date of creation: 2001
Date of revision:
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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
Phone: (919) 660-1800
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Web page: http://econ.duke.edu/
Find related papers by JEL classification:
- H1 - Public Economics - - Structure and Scope of Government
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-PUB-2001-07-17 (Public Finance)
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- Fabio Fiorillo & Agnese Sacchi, 2012. "The Political Economy of the Standard Level of Services: The Role of Income Distribution," CESifo Working Paper Series 3696, CESifo Group Munich.
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