Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85963
Authors: 
Dur, Robert
Staal, Klaas
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-074/1
Abstract: 
We analyze a simple model of local public good provision in a country consisting of a large number of heterogeneous regions, each comprising two districts, a city and a village. When districts remain autonomous and local public goods have positive spillover effects on the neighbouring district, there is underprovision of public goods in both the city and the village. When districts unite, underprovision persists in the village (and may even become 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 unification. We examine how national transfers to local governments can resolve these problems.
Subjects: 
local public goods
municipal consolidation
voting
intergovernmental transfers
JEL: 
D7
H2
H7
R5
Document Type: 
Working Paper

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