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A Note on Local Public Good Induced Spillovers between a Leading and a Lagging Region

Amitrajeet Batabyal ()

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze spatial spillovers in an aggregate economy consisting of a leading and a lagging region where the spillovers stem from the provision of a local public good. Specifically, if the leading region provides the public good then the lagging region obtains some spillover benefits and vice versa. We first solve for the Nash equilibrium levels of the local public goods in the two regions when public investment decisions are simultaneous; next, we determine the equilibrium welfare levels in each region. Second, on the assumption that the public investment decisions are centralized, we compute the levels of the local public goods that maximize aggregate welfare. Finally, we describe an interregional transfer scheme that leads each region to choose non-cooperatively in a Nash equilibrium the same public investment levels as those that arise when aggregate welfare is maximized.

Keywords: Lagging Region; Leading Region; Local Public Good; Spatial Spillover (search for similar items in EconPapers)
JEL-codes: O18 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-gth and nep-ure
Date: 2018-05-31, Revised 2018-06-01
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https://mpra.ub.uni-muenchen.de/87128/1/MPRA_paper_87128.pdf original version (application/pdf)

Related works:
Journal Article: NOTE ON LOCAL PUBLIC GOOD INDUCED SPILLOVERS BETWEEN A LEADING AND A LAGGING REGION (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:87128

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