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Should a non-rival public good always be provided centrally?

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  • GRAVEL, Nicolas
  • POITEVIN, Michel

Abstract

This paper discusses the problem of optimal design of a jurisdiction structure from the view point of a utilitarian social planner when individuals with identical utility functions for a non-rival public good and private consumption have private information about their contributive capacities. It shows that the superiority of a centralized provision of a non-rival public good over a federal one does not always hold. Specifically, when differences in individuals’ contributive capacities are large, it is better to provide the public good in several distinct jurisdictions rather than to pool these jurisdictions into a single one. In the specific situation where individuals have logarithmic utilities, the paper provides a complete characterization of the optimal jurisdiction structure in the two-type case.

Suggested Citation

  • GRAVEL, Nicolas & POITEVIN, Michel, 2015. "Should a non-rival public good always be provided centrally?," Cahiers de recherche 2015-06, Universite de Montreal, Departement de sciences economiques.
    • Handle: RePEc:mtl:montde:2015-06
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    File URL: http://hdl.handle.net/1866/12854
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    1. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
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    5. Greenberg, Joseph, 1983. "Local public goods with mobility: Existence and optimality of a general equilibrium," Journal of Economic Theory, Elsevier, vol. 30(1), pages 17-33, June.
    6. Thomas Aronsson & Sören Blomquist, 2008. "Redistribution and Provision of Public Goods in an Economic Federation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(1), pages 125-143, February.
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    More about this item

    Keywords

    Federalism; Jurisdictions; Asymmetric information; Equalization; Second best; Public goods; City mergers;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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