Local Public Finance: An Alternative Perspective

David Nowlan

Working Papers from University of Toronto, Department of Economics

Abstract: 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.

JEL-codes: H7 R51 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1996-04-15
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:nowlan-96-01

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