Local Public Good Provision, Municipal Consolidation, and National Transfers

Robert Dur and Klaas Staal

No 2061, CESifo Working Paper Series from CESifo

Abstract: We analyze a simple model of local public good provision in a region 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 become even 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; tax discrimination (search for similar items in EconPapers)
JEL-codes: D70 H20 H70 R50 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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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 (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2061

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