A Note on Local Public Investment and Debt Limitation in a Federation
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.
Volume (Year): 22 (2009)
Issue (Month): 1 (Spring)
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