Efficiency and Equity in the Location of Indivisible Local Public Goods
Unlike the typical issue in which optimality requires some amount of local public goods provided in every town/locality, determining the best location for an indivisible local collective good, is not straightforward by merely appealing to the Pareto efficiency criterion. If two cities are considered, the welfare possibilities frontier associated with the location of a particular good in one city not always dominates or is dominated by its counterpart in the other city. Three alternatives are suggested to solve this indeterminacy issue: disregard the equity criterion, shun the Pareto efficiency criterion, or complement the latter with some distributive criterion. In the present study, several approaches deciding on this issue are evaluated, viz., a social welfare function, Kaldor and Rawls criteria, unanimity, simple majority and despotism.
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Volume (Year): VIII (2010)
Issue (Month): 1 & 2 (February & May)
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