Should a Non-Rival Public Good Always Be Provided Centrally?

Nicolas Gravel () and Michel Poitevin

No 1444, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper discusses the problem of optimal design of a jurisdiction structure from the view point of a welfarist social planner when households with identical utility functions for 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 households 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 case where households have logarithmic utilities, the paper provides a complete characterization of the optimal jurisdiction structure in the two-type case. "C'est pour unir les avantages divers qui résultent de la grandeur et de la petitesse des nations que le fédératif a été créé." (Alexis de Toqueville)

Keywords: federalism; jurisdictions; asymmetric information; equalization; city mergers (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-09-10
New Economics Papers: this item is included in nep-cta and nep-mic
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Related works:
Working Paper: Should a non-rival public good always be provided centrally (2015)
Working Paper: Should a non-rival public good always be provided centrally? (2015)
Working Paper: Should a Non-rival Public Good Always be Provided Centrally? (2015)
Working Paper: Should a Non-Rival Public Good Always Be Provided Centrally? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1444

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