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Local Public Finance: An Alternative Perspective

  • David M. Nowlan
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    In the standard model of local public finance, a welfare-maximizing local authority with an income constraint ought to produce a set of services, user charges and taxes that are Pareto efficient, on the assumption that a higher level of government equalizes the marginal social utilities of everyone's income. In the alternative model of this paper, the higher-level government is assumed to equate marginal social utilities of time, not income, while the local authorities maximize welfare in the face of a time constraint. In this alternative model, unlike the standard model, optimal prices for some types of excludable goods yield consensus over facility size even in a heterogeneous population, and segregation hurts the worse off. Local actions have redistributive effects, while a senior level of government establishes, as usual, the framework for such redistribution.

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    Paper provided by University of Toronto, Department of Economics in its series Working Papers with number nowlan-96-01.

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    Length: 29 pages
    Date of creation: 15 Apr 1996
    Date of revision:
    Handle: RePEc:tor:tecipa:nowlan-96-01
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    1. Berglas, Eitan & Pines, David, 1981. "Clubs, local public goods and transportation models : A synthesis," Journal of Public Economics, Elsevier, vol. 15(2), pages 141-162, April.
    2. Feldstein, Martin S, 1972. "Distributional Equity and the Optimal Structure of Public Prices," American Economic Review, American Economic Association, vol. 62(1), pages 32-36, March.
    3. Berglas, E. & Pines, D., 1984. "Resource constraint, replicability and mixed clubs : A reply," Journal of Public Economics, Elsevier, vol. 23(3), pages 391-397, April.
    4. Juster, F. Thomas & Stafford, Frank P., 1990. "The Allocation of Time: Empirical Findings, Behavioural Models, and Problems of Measurement," Working Paper Series 258, Research Institute of Industrial Economics.
    5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
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