Migration raises a potential free rider problem for the provision of durable local public goods if the late-comers can enjoy the public good without paying for it. Allowing communities to finance public goods by debt mitigates this problem, since future immigrants have to share the burden of the debt. However, in equilibrium there will be over-accumulation of local debt. There may be more or less public good than in first best, but conditional on the inefficiently high levels of debt there will be too few public goods. A competitive market for land reduces but does not in general eliminate the inefficiencies.
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Paper provided by Pennsylvania State - Department of Economics in its series Papers with number
6-00-1.
Length: 43 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:pensta:6-00-1
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Find related papers by JEL classification: H41 - Public Economics - - Publicly Provided Goods - - - Public Goods H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
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