Decentralized Road Investment and Pricing in a Monocentric, Multi-Jurisdictional City: Efficiency with Spillovers

Jan Brueckner

No 4473, CESifo Working Paper Series from CESifo

Abstract: This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. This conclusion is closely tied to the famous self-financing theorem of transportation economics.

Keywords: spillovers; congestion; self-financing theorem (search for similar items in EconPapers)
JEL-codes: H70 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4473

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