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A Note on Local Public Good Induced Spillovers between a Leading and a Lagging Region

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  • Batabyal, Amitrajeet

Abstract

We analyze spatial spillovers in an aggregate economy consisting of a leading and a lagging region where the spillovers stem from the provision of a local public good. Specifically, if the leading region provides the public good then the lagging region obtains some spillover benefits and vice versa. We first solve for the Nash equilibrium levels of the local public goods in the two regions when public investment decisions are simultaneous; next, we determine the equilibrium welfare levels in each region. Second, on the assumption that the public investment decisions are centralized, we compute the levels of the local public goods that maximize aggregate welfare. Finally, we describe an interregional transfer scheme that leads each region to choose non-cooperatively in a Nash equilibrium the same public investment levels as those that arise when aggregate welfare is maximized.

Suggested Citation

  • Batabyal, Amitrajeet, 2018. "A Note on Local Public Good Induced Spillovers between a Leading and a Lagging Region," MPRA Paper 87128, University Library of Munich, Germany, revised 01 Jun 2018.
  • Handle: RePEc:pra:mprapa:87128
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    File URL: https://mpra.ub.uni-muenchen.de/87128/1/MPRA_paper_87128.pdf
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    More about this item

    Keywords

    Lagging Region; Leading Region; Local Public Good; Spatial Spillover;

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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