Local Public Goods, Debt and Migration

Christian Schultz () and Tomas Sjostrom

No 00-11, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: Migration raises a potential free rider problem for th eprovision of durable local goods if the late-comers can enjoy the public good without paying for it. Allowing communities to finance public goods by debt mitigates this problem, since future immigrants have to share the burden of the debt. However, in equilibrium there will be over-accumulation of local debt. There may be more or less public good than in first best, but conditional on the inefficiently high level of debt there will be too few public goods. A competitive market for land reduces but does not in general eliminate the inefficiencies.

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Related works:
Journal Article: Local public goods, debt and migration (2001)
Working Paper: Local Public Goods, Debt and Migration (2000)
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