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Review of Economic Design

, Volume 11, Issue 3, pp 199–216 | Cite as

The effect of spillovers on the provision of local public goods

  • Francis Bloch
  • Unal Zenginobuz
Original Paper

Abstract

This paper analyzes the provision of local public goods with positive spillovers across jurisdictions. If spillovers are symmetric, the non-cooperative game played by jurisdictions admits a unique equilibrium, and an increase in spillovers reduces the total provision of public goods. Smaller jurisdictions always reduce their contribution, but larger jurisdictions can increase their contribution. When spillovers are asymmetric, equilibrium is unique if spillovers are low, while multiple equilibria exist for high spillover values. In the case of two jurisdictions, an increase in the flow of spillovers to one jurisdiction benefits agents from that jurisdiction but harms agents in the other jurisdiction. Beyond the case of two jurisdictions, the effect of changes in spillovers cannot be signed. An increase in the spillovers flowing to a jurisdiction can actually result in an increase in the supply of public goods by that jurisdiction and harm agents residing in it, while benefiting agents in the other jurisdictions. The results of the paper reveal the complexity of interactions that will plague the design of institutions for multijurisdictional local public good economies with spillovers.

Keywords

Local public goods Positive spillovers Equilibrium 

JEL Classification

H41 H73 H77 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.GREQAM Université de la Méditerranée and Warwick UniversityMarseilleFrance
  2. 2.Department of Economics and Center for Economic DesignBogazici UniversityBebek, IstanbulTurkey

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