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Open to Outsiders? Fiscal Commitment and Spillovers from Local Public Services

Author

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  • Yuya Kikuchi

    (Faculty of Economics, Seijo University)

  • Hikaru Ogawa

    (Faculty of Economics, The University of Tokyo)

Abstract

Local governments can regulate whether libraries, sports facilities, cultural amenities, and other local public services are open to nonresidents. This paper shows that endogenizing such public-service openness can overturn the welfare ranking of fiscal institutions. We compare centralized leadership with decentralized leadership under expenditure and tax commitment. When openness is fixed at a common exogenous level, centralized leadership dominates tax commitment, so tax commitment is never uniquely welfare maximizing. When local governments choose openness, however, the ranking changes. Under tax commitment, a region can attract more central resources by opening its service to outsiders, giving local governments an incentive to choose full openness. Under the other fiscal institutions, this mechanism does not operate, so local governments choose complete closure. This difference in access reverses the welfare ranking in favor of tax commitment.

Suggested Citation

  • Yuya Kikuchi & Hikaru Ogawa, 2026. "Open to Outsiders? Fiscal Commitment and Spillovers from Local Public Services," CIRJE F-Series CIRJE-F-1278, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2026cf1278
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