Local Public Good Provision, Municipal Consolidation, and National Transfers

Robert Dur and Klaas Staal

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We analyze a simple model of local public good provision in a country consisting of a large number of heterogeneous regions, each comprising two districts, a city and a village. When districts remain autonomous and local public goods have positive spillover effects on the neighboring district, there is underprovision of public goods in both the city and the village. When districts consolidate, underprovision persists in the village (and may even become more severe), whereas overprovision of public goods arises in the city as urbanites use their political power to exploit the villagers. From a social welfare point of view, inhabitants of the village have insufficient incentives to vote for consolidation. We examine how national transfers to local governments can resolve these problems.

Keywords: local public goods; municipal consolidation; voting; intergovernmental transfers (search for similar items in EconPapers)
JEL-codes: D7 H2 H7 R5 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Local public good provision, municipal consolidation, and national transfers (2008)
Working Paper: Local Public Good Provision, Municipal Consolidation, and National Transfers (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:86

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