A General Equilibrium Model of Regional Public Goods and Optimizing Subsidies
The present paper follows the neoclassical tradition of private goods general equilibrium theory and integrates public goods into a simple equilibrium model. In doing so, no attempt is made to construct a behavioural theory of government to explain the articulation of individual demand for public goods. In what follows, it is assumed that private and public goods are provided by a set of governments and private firms whose market behaviour replicates the long-run equilibrium behaviour of perfectly competitive industries. The paper will use a general equilibrium model to examine the effects of a federal subsidy to a provincial government, which produces a single public good for a province whose population is endogenously determined.
|Date of creation:||Aug 1971|
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- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
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