The Effect of Spillovers on the Provision of Local Public Goods
AbstractThis paper analyzes the provision of local public goods with positive spillovers across jurisdictions. If spillovers are symmetric, the noncooperative game played by jurisdictions admits a unique equilibrium, and an increase in spillovers reduces the total provision of public goods. Smaller jurisdictions always reduce their contribution, but larger jurisdictions can increase their contribution. When spillovers are asymmetric, equilibrium is unique if spillovers are low, while multiple equilibria exist for high spillover values. In the case of two jurisdictions, an increase in the flow of spillovers to one jurisdiction benefits agents from that jurisdiction but harms agents in the other jurisdiction. Beyond the case of two jurisdictions, the effect of changes in spillovers cannot be signed. An increase in the spillovers flowing to a jurisdiction can actually result in an increase in the supply of public goods by that jurisdiction and harm agents residing in it, while benefiting agents in the other jurisdictions. The results of the paper reveal the complexity of interactions that will plague the design of institutions for multijurisdictional local public good economies with spillovers.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 186.
Date of creation: 15 Dec 2004
Date of revision: 05 Oct 2006
local public goods; positive spillovers; equilibrium;
Other versions of this item:
- Francis Bloch & Unal Zenginobuz, 2007. "The effect of spillovers on the provision of local public goods," Review of Economic Design, Springer, vol. 11(3), pages 199-216, November.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-GEO-2006-10-14 (Economic Geography)
- NEP-PBE-2006-10-14 (Public Economics)
- NEP-PUB-2006-10-14 (Public Finance)
- NEP-SOC-2006-10-14 (Social Norms & Social Capital)
- NEP-URE-2006-10-14 (Urban & Real Estate Economics)
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