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Local Public Finance: An Alternative Perspective

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  • David M. Nowlan
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    Abstract

    In the standard model of local public finance, a welfare-maximizing local authority with an income constraint ought to produce a set of services, user charges and taxes that are Pareto efficient, on the assumption that a higher level of government equalizes the marginal social utilities of everyone's income. In the alternative model of this paper, the higher-level government is assumed to equate marginal social utilities of time, not income, while the local authorities maximize welfare in the face of a time constraint. In this alternative model, unlike the standard model, optimal prices for some types of excludable goods yield consensus over facility size even in a heterogeneous population, and segregation hurts the worse off. Local actions have redistributive effects, while a senior level of government establishes, as usual, the framework for such redistribution.

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    File URL: http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-NOWLAN-96-01.ps
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    File URL: http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-NOWLAN-96-01.pdf
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    Bibliographic Info

    Paper provided by University of Toronto, Department of Economics in its series Working Papers with number nowlan-96-01.

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    Length: 29 pages
    Date of creation: 15 Apr 1996
    Date of revision:
    Handle: RePEc:tor:tecipa:nowlan-96-01

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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    2. Berglas, Eitan & Pines, David, 1981. "Clubs, local public goods and transportation models : A synthesis," Journal of Public Economics, Elsevier, vol. 15(2), pages 141-162, April.
    3. Feldstein, Martin S, 1972. "Distributional Equity and the Optimal Structure of Public Prices," American Economic Review, American Economic Association, vol. 62(1), pages 32-36, March.
    4. Berglas, E. & Pines, D., 1984. "Resource constraint, replicability and mixed clubs : A reply," Journal of Public Economics, Elsevier, vol. 23(3), pages 391-397, April.
    5. Juster, F Thomas & Stafford, Frank P, 1991. "The Allocation of Time: Empirical Findings, Behavioral Models, and Problems of Measurement," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 471-522, June.
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