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Welfare Analysis of the Number and Locations of Local Public Facilities

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Author Info

  • Marcus Berliant

    ()
    (Washington University, St. Louis, MO, USA)

  • Shin-Kun Peng

    ()
    (Institute of Economics, Academia Sinica, Taipei, Taiwan)

  • Ping Wang

    ()
    (Vanderbilt University and NBER, USA)

Abstract

We develop a discrete or finite household model with congestable local public goods where the level of provision, the number of facilities and their locations are all endogenously determined in a purely normative context. We prove the existence of an equal-treatment identical-provision second best optimum, where all households are required to reach the same utility level, the provision of local public good is required to be the same at all facilities, and all facilities must serve the same number of consumers. Such an optimal public facility configuration may or may not be geographically centralized if there is only a single public facility site. Moreover, the optimal public facility configuration could be either concentrated (single site) or dispersed (multiple sites), depending crucially on the degree of congestability and the household valuation of the local public good as well as the commuting cost.

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Bibliographic Info

Paper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 04-A011.

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Length: 34 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:sin:wpaper:04-a011

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Keywords: Congestable Local Public Goods; Optimal Public Facility Configurations;

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References

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  1. Shin-Kun Peng, 1996. "The location of governmental facilities and equilibrium urban configuration," The Annals of Regional Science, Springer, Springer, vol. 30(3), pages 247-272.
  2. Berliant, Marcus & ten Raa, Thijs, 1991. "On the continuum approach of spatial and some local public goods or product differentiation models: Some problems," Journal of Economic Theory, Elsevier, vol. 55(1), pages 95-120, October.
  3. Ellickson, Bryan & Grodal, Birgit & Scotchmer, Suzanne & Zame, William R., 2001. "Clubs and the Market: Large Finite Economies," Journal of Economic Theory, Elsevier, vol. 101(1), pages 40-77, November.
  4. Berliant, Marcus & Papageorgiou, Yorgos Y. & Wang, Ping, 1990. "On welfare theory and urban economics," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 245-261, September.
  5. Scotchmer, Suzanne, 1986. "Local public goods in an equilibrium : How pecuniarv externalities matter," Regional Science and Urban Economics, Elsevier, vol. 16(4), pages 463-481, November.
  6. Marcus Berliant & Shin-Kun Peng & Ping Wang, 2004. "Welfare Analysis of the Number and Locations of Local Public Facilities," Public Economics, EconWPA 0407015, EconWPA, revised 20 Jul 2005.
  7. Berliant, Marcus & Fujita, Masahisa, 1992. "Alonso's Discrete Population Model of Land Use: Efficient Allocations and Competitive Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 535-66, August.
  8. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November.
  9. Arnott, Richard J & Stiglitz, Joseph E, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 471-500, November.
  10. Wildasin, David E., 1987. "Theoretical analysis of local public economics," Handbook of Regional and Urban Economics, Elsevier, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 29, pages 1131-1178 Elsevier.
  11. Revelle, Charles, 1987. "Urban public facility location," Handbook of Regional and Urban Economics, Elsevier, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 27, pages 1053-1096 Elsevier.
  12. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
  13. Thisse, Jacques-Francois & Wildasin, David E., 1992. "Public facility location and urban spatial structure : Equilibrium and welfare analysis," Journal of Public Economics, Elsevier, vol. 48(1), pages 83-118, June.
  14. Berliant, Marcus & ten Raa, Thijs, 1994. "Regional science: The state of the art," Regional Science and Urban Economics, Elsevier, vol. 24(5), pages 631-647, October.
  15. Berliant, Marcus, 1985. "Equilibrium models with land : A criticism and an alternative," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 325-340, June.
  16. Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
  17. Conley, John P. & Wooders, Myrna H., 2001. "Tiebout Economies with Differential Genetic Types and Endogenously Chosen Crowding Characteristics," Journal of Economic Theory, Elsevier, vol. 98(2), pages 261-294, June.
  18. Berliant, Marcus & Wang, Ping, 1993. "Endogenous formation of a city without agglomerative externalities or market imperfections : Marketplaces in a regional economy," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 121-144, March.
  19. Asami, Y. & Fujita, M. & Smith, T. E., 1991. "On the foundations of land use theory : Discrete versus continuous populations," Regional Science and Urban Economics, Elsevier, vol. 20(4), pages 473-508, February.
  20. Ellickson, Bryan, 1979. "Competitive equilibrium with local public goods," Journal of Economic Theory, Elsevier, vol. 21(1), pages 46-61, August.
  21. Hochman, Oded, 1982. "Congestable local public goods in an urban setting," Journal of Urban Economics, Elsevier, vol. 11(3), pages 290-310, May.
  22. Raa, M.H. ten & Berliant, M., 1991. "On the continuum approach of spatial and some local public goods or product differentiation models," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381947, Tilburg University.
  23. Fujita, Masahisa, 1986. "Optimal location of public facilities : Area dominance approach," Regional Science and Urban Economics, Elsevier, vol. 16(2), pages 241-268, May.
  24. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, Econometric Society, vol. 51(6), pages 1753-65, November.
  25. Hochman, O. & Pines, D., 1997. "On the Agglomeration of Non-Residential Activities in an Urban Area," Papers, Tel Aviv 34-97, Tel Aviv.
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Citations

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Cited by:
  1. Marcus Berliant & Shin-Kun Peng & Ping Wang, 2004. "Welfare Analysis of the Number and Locations of Local Public Facilities," IEAS Working Paper : academic research 04-A011, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  2. Tajibaeva, Liaila & Haight, Robert G. & Polasky, Stephen, 2008. "A discrete-space urban model with environmental amenities," Resource and Energy Economics, Elsevier, Elsevier, vol. 30(2), pages 170-196, May.
  3. Chen, Been-Lon & Peng, Shin-Kun & Wang, Ping, 2009. "Intergenerational human capital evolution, local public good preferences, and stratification," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 33(3), pages 745-757, March.
  4. Shin-Kun Peng & Ping Wang, 2003. "Sorting by Foot: Consumable Travel-for Local Public Good and Equilibrium Stratification," IEAS Working Paper : academic research 03-A008, Institute of Economics, Academia Sinica, Taipei, Taiwan.

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