The political economy of pricing and capacity decisions for congestible local public goods in a federal state
AbstractThis paper studies the political economy of pricing and investment for excludable and congestible public goods in a federal state. Currently, we observe a wide variety of practices, ranging from federal gasoline taxes and road investment to the local supply of -- and sometimes free access to -- libraries, parking spaces and public swimming pools. The two-region model we develop allows for spill-overs between regions, it takes into account congestion, and it captures both heterogeneity between and within regions. Regional decisions are taken by majority voting; decisions at the federal level are taken either according to the principle of a minimum winning coalition or through cooperative bargaining. We have the following results. First, when users form the majority in at least one region, decentralized decision making performs certainly better than centralized decision making if spill-overs are not too large. Centralized decisions may yield higher welfare than decentralization only if users have a large majority and the infrastructure in a given region is intensively used by both local and outside users. Second, if non-users form a majority in both regions, centralized and decentralized decision making yield the same socially undesirable outcome, with prices that are much too high. Third, both bargaining and imposing uniform price restrictions across regions improve the performance of centralized decisions. Fourth, the performance of decentralized supply is strongly enhanced by local self-financing rules; it prevents potential exploitation of users within regions. Self-financing rules at the central level are not necessarily welfare-improving. Finally, the results of this paper contribute to a better understanding of actual policy-making.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces13.16.
Date of creation: Sep 2013
Date of revision:
Other versions of this item:
- DE BORGER, Bruno & PROOST, Stef, 2013. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," Working Papers 2013020, University of Antwerp, Faculty of Applied Economics.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-24 (All new papers)
- NEP-CDM-2013-09-24 (Collective Decision-Making)
- NEP-NPS-2013-09-24 (Nonprofit & Public Sector)
- NEP-PBE-2013-09-24 (Public Economics)
- NEP-POL-2013-09-24 (Positive Political Economics)
- NEP-TRE-2013-09-24 (Transport Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- Knight, Brian, 2004.
"Parochial interests and the centralized provision of local public goods: evidence from congressional voting on transportation projects,"
Journal of Public Economics,
Elsevier, vol. 88(3-4), pages 845-866, March.
- Brian Knight, 2003. "Parochial Interests and the Centralized Provision of Local Public Goods: Evidence from Congressional Voting on Transportation Projects," NBER Working Papers 9748, National Bureau of Economic Research, Inc.
- King, David & Manville, Michael & Shoup, Donald, 2007. "The political calculus of congestion pricing," University of California Transportation Center, Working Papers qt9js9z8gz, University of California Transportation Center.
- De Borger Bruno & Dunkerley Fay & Proost Stef, 2006.
"Strategic investment and pricing decisions in a congested transport corridor,"
Energy, Transport and Environment Working Papers Series
ete0602, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
- De Borger, B. & Dunkerley, F. & Proost, S., 2007. "Strategic investment and pricing decisions in a congested transport corridor," Journal of Urban Economics, Elsevier, vol. 62(2), pages 294-316, September.
- DE BORGER, Bruno & DUNKERLEY, Fay & PROOST, Stef, 2006. "Strategic investment and pricing decisions in a congested transport corridor," Working Papers 2006021, University of Antwerp, Faculty of Applied Economics.
- Edward Calthrop & Bruno De Borger & Stef Proost, 2008.
"Cost-benefit analysis of transport investments in distorted economies,"
Center for Economic Studies - Discussion papers
ces0818, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Calthrop, Edward & De Borger, Bruno & Proost, Stef, 2010. "Cost-benefit analysis of transport investments in distorted economies," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 850-869, August.
- CALTHROP, Edward & DE BORGER, Bruno & PROOST, Stef, 2008. "Cost-benefit analysis of transport investments in distorted economies," Working Papers 2008011, University of Antwerp, Faculty of Applied Economics.
- DE BORGER, Bruno & PROOST, Stef, 2010.
"A political economy model of road pricing,"
2010014, University of Antwerp, Faculty of Applied Economics.
- Marcucci, Edoardo & Marini, Marco, 2005.
"Road pricing as a citizen-candidate game,"
29293, University Library of Munich, Germany.
- Brueckner, Jan & Selod, Harris, 2004.
"The Political Economy of Urban Transport System Choice,"
CEPR Discussion Papers
4682, C.E.P.R. Discussion Papers.
- Brueckner, Jan K. & Selod, Harris, 2006. "The political economy of urban transport-system choice," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 983-1005, August.
- Jan K. Brueckner & Harris SELOD, 2006. "The political economy of urban transport-system choice," Working Papers 10220, Institut National de la Recherche Agronomique, France.
- King, David & Manville, Michael & Shoup, Donald, 2007. "The political calculus of congestion pricing," Transport Policy, Elsevier, vol. 14(2), pages 111-123, March.
- Lockwood, Ben, 2002.
"Distributive Politics and the Costs of Centralization,"
Review of Economic Studies,
Wiley Blackwell, vol. 69(2), pages 313-37, April.
- Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 313-337.
- Lockwood, Ben, 1998. "Distributive Politics and the Costs of Centralization," CEPR Discussion Papers 2046, C.E.P.R. Discussion Papers.
- Feng Xie & David Levinson, 2009.
"Governance choice on a serial network,"
Springer, vol. 141(1), pages 189-212, October.
- Russo, Antonio, 2012.
"Voting on Road Congestion Policy,"
TSE Working Papers
12-310, Toulouse School of Economics (TSE), revised Nov 2012.
- Barry Ubbels & Erik Verhoef, 2006.
"Governmental Competition in Road Charging and Capacity Choice,"
Tinbergen Institute Discussion Papers
06-036/3, Tinbergen Institute, revised 10 Sep 2007.
- Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
- John William Hatfield & Gerard Padró i Miquel, 2012. "A Political Economy Theory Of Partial Decentralization," Journal of the European Economic Association, European Economic Association, vol. 10(3), pages 605-633, 05.
- Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
- Ross Hickey, 2013. "Bicameral bargaining and federation formation," Public Choice, Springer, vol. 154(3), pages 217-241, March.
- Craig, Steven G., 1987. "The impact of congestion on local public good production," Journal of Public Economics, Elsevier, vol. 32(3), pages 331-353, April.
- Jan K. Brueckner, 2013. "Efficiency of Decentralized Road Investment and Pricing in a Multi-Jurisdictional City with Spillovers," CESifo Working Paper Series 4384, CESifo Group Munich.
- Hansjörg Blöchliger, 2008. "Market Mechanisms in Public Service Provision," OECD Economics Department Working Papers 626, OECD Publishing.
- Hulten, Charles R. & Schwab, Robert M., 1997. "A fiscal federalism approach to infrastructure policy," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 139-159, April.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karla Vander Weyden).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.