Location of Repository

Local Public Good Provision, Municipal Consolidation, and National Transfers

By Robert Dur and Klaas Staal


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.local public goods, municipal consolidation, voting, intergovernmental transfers, tax discrimination

OAI identifier:

Suggested articles



  1. (2007). A Role Model for China? Exchange Rate Flexibility and Monetary Policy in Japan,
  2. (2007). Adding Geography to the New Economic Geography,
  3. (2007). and Eric Toulemonde, Negative Intra-Group Externalities in TwoSided Markets,
  4. (2007). Atomistic Congestion Tolls at Concentrated Airports? Seeking a Unified View in the Internalization Debate,
  5. (2007). Bazoumana Ouattara and Eric Strobl, Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid,
  6. (2007). Catherine Fuss, Hashem Pesaran and Patrick Sevestre, Lumpy Price Adjustments: A Microeconometric Analysis,
  7. CESifo Working Paper Series (for full list see Twww.cesifo-group.de)T ___________________________________________________________________________
  8. (2007). Chirinko and Debdulal Mallick, The Fisher/Cobb-Douglas Paradox, Factor Shares, and Cointegration,
  9. (2007). Does High Inflation Cause Central Bankers to Lose their Job? Evidence Based on a New Data Set,
  10. (2007). Downward Nominal Wage Rigidity in the OECD,
  11. (2007). Effects of Innovation on Employment: A Dynamic Panel Analysis,
  12. (2007). Endogenous Skill Formation and the Source Country Effects
  13. (2007). Equal Sacrifice and Fair Burden Sharing in a Public Goods Economy,
  14. (2007). Eric Mayer and Timo Wollmershäuser, The Price Puzzle Revisited: Can the Cost Channel Explain a Rise in Inflation after a Monetary Policy Shock?,
  15. (2007). Esteban Rossi-Hansberg and Kurt Schmidheiny, The Effect of Information and Communication Technologies on Urban Structure,
  16. (2007). Exchange Rate Volatility and Growth
  17. (2007). Federal Tax-Transfer Policy and Intergovernmental PreCommitment,
  18. (2007). Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation,
  19. (2007). Fiscal Competition in Space and Time: An Endogenous-Growth Approach,
  20. (2007). Grasdal and Tor Helge Holmås, Regulation and Pricing of Pharmaceuticals: Reference Pricing or Price Cap Regulation?,
  21. (2007). Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry,
  22. (2007). Henrik Jordahl and Panu Poutvaara, The Looks of a Winner: Beauty, Gender, and Electoral Success,
  23. (2004). House prices and the structure of local government: An application of spatial statistics,
  24. (2007). Imperfect Transmission of Tacit Knowledge and other Barriers to Entrepreneurship,
  25. (2007). Inflation and Output Dynamics in a Model with Labor Market Search and Capital Accumulation,
  26. (2007). Interest Rate Linkages in EMU Countries: A Rolling Threshold Vector Error-Correction Approach,
  27. (2003). Intergovernmental grants as tactical instrument: Some empirical evidence from Swedish municipalities,
  28. (2007). International Outsourcing under Monopolistic Competition: Winners and Losers,
  29. (2007). Is the Notification of Monitoring a Threat to the Unemployed? A Regression Discontinuity Approach,
  30. (2007). It is a Theft but not a Crime,
  31. (2007). Jean-Marie Lozachmeur and Pierre Pestieau, Income Taxation of Couples and the Tax Unit Choice,
  32. (2007). Jim Malley and Apostolis Philippopoulos, Public Education Expenditure, Growth and Welfare,
  33. (2007). Jorge Fornero and Tomasz Michalak, A Microfounded Sectoral Model for Open Economies,
  34. (2007). Judiciaries in Corrupt Societies,
  35. (2007). Labor Market Regulation and the Legal System,
  36. (2007). Leaky Bucket in the Real World: Estimating Inequality Aversion Using Survey Data,
  37. (2006). Local government consolidations: The impact of political transaction costs,
  38. (2007). Local Public Good Provision, Municipal Consolidation, and National Transfers,
  39. (2007). Long Run and
  40. (2007). Macroeconomic Consequences of Distributional Conflicts,
  41. (2007). Migrating Football Players, Transfer Fees and Migration Controls,
  42. (2007). Modelling Volatilities and Conditional Correlations in Futures Markets with a Multivariate t Distribution,
  43. (2007). Monetary Commitment, Institutional Constraints and Inflation: Empirical Evidence for OECD Countries since the 1970s,
  44. (2007). Monetary Policy and Swedish Unemployment Fluctuations,
  45. (2007). On the Evolution of Market Institutions: The Platform Design Paradox,
  46. (2007). Overprotected Politicians,
  47. (2007). Pension Reform and Labor Market Incentives,
  48. (2007). Please bring me the New York Times – On the European Roots of Richard Abel Musgrave,
  49. (2004). Political jurisdictions in heterogeneous communities,
  50. (2007). Political Pressures and Monetary Mystique,
  51. (2007). Preemption, Start-Up Decisions and the Firms’ Capital Structure,
  52. (2007). Profit Shifting in the EU: Evidence from Germany,
  53. (2007). Rübbelke and Eytan Sheshinski, Policies to Internalize Reciprocal International Spillovers,
  54. (2007). Service Offshoring and White-Collar Employment,
  55. (2007). Size and Development of the Shadow Economy and of Do-it-yourself Activities in Germany,
  56. (2007). Social Exchange and Common Agency in Organizations,
  57. (2007). Strategic Tax Collection and Fiscal Decentralisation: The Case of Russia,
  58. (1998). Tax competition and revelation of preferences for public expenditure,
  59. (2007). Tax Progression under Collective Wage Bargaining and Individual Effort Determination,
  60. (2007). The Economic Effects of Constitutions: Replicating – and Extending – Persson and Tabellini,
  61. The Economics of Politically Connected Firms,
  62. (2007). The Growth Effect of Democracy: Is it Heterogenous and how can it be Estimated?,
  63. (2003). The political economy of intergovernmental grants,
  64. (2007). Transfer Pricing or Formula Apportionment? Tax-Induced Distortions of Multinationals’ Investment and Production Decisions,
  65. (2007). What Can Go Wrong Will Go Wrong: Birthday Effects and Early Tracking in the German School System,
  66. (2007). Yoram Margalioth and Efraim Sadka, Incorporating Affirmative Action into the Welfare State,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.