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A Note on Local Public Investment and Debt Limitation in a Federation

  • Alfons J. Weichenrieder


    (Goethe University Frankfurt, Oxford University Centre for Business Taxation, and CESifo)

The paper considers the local provision of public infrastructure in symmetric jurisdictions when population is mobile. It shows that an inflexible deficit limitation may result in too little local public investment if the population is mobile. Conversely, given the existence of migration externalities, implementing Musgrave’s pay as you use finance, according to which new debt should match net investment, can lead to optimal local investment.

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Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 22 (2009)
Issue (Month): 1 (Spring)
Pages: 3-8

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Handle: RePEc:fep:journl:v:22:y:2009:i:1:p:2-8
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  1. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  2. Christian Schultz & Tomas Sjöström, . "Local Public Goods, Debt and Migration," EPRU Working Paper Series 00-11, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  3. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  4. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
  5. von Hagen,Juergen, . "A note on the empirical effectiveness of formal fiscal restraints," Discussion Paper Serie B 155, University of Bonn, Germany.
  6. Poterba, James M, 1996. "Budget Institutions and Fiscal Policy in the U.S. States," American Economic Review, American Economic Association, vol. 86(2), pages 395-400, May.
  7. Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August.
  8. Boadway, Robin, 1982. "On the Method of Taxation and the Provision of Local Public Goods: Comment," American Economic Review, American Economic Association, vol. 72(4), pages 846-51, September.
  9. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, 04.
  10. Buiter, Willem H. & Corsetti, Giancarlo & Roubini, Nouriel, 1992. "`Excessive Deficits': Sense and Nonsense in the Treaty of Maastricht," CEPR Discussion Papers 750, C.E.P.R. Discussion Papers.
  11. Henning Bohn & Robert P. Inman, . "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States (Reprint 060)," Rodney L. White Center for Financial Research Working Papers 10-96, Wharton School Rodney L. White Center for Financial Research.
  12. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
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