Public goods, efficiency, and regional fiscal equalization

Flatters, Frank; Henderson, Vernon; Mieszkowski, Peter

doi:10.1016/0047-2727(74)90028-0

Cited by 261 publications

(108 citation statements)

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“…Using the price and variety distortions for the differentiated good, we can rewrite ( 57 ) to obtain the extension of Harberger's excess burden to include the variety distortion. Because this is for the entire economy, we have to divide this by the number of cities to obtain the condition that corresponds to Flatters et al (1974): If the initial allocation, where 0  A , has the optimal city size, then 0 /  dN dA , which immediately yields the corollary.…”

Section: Discussionmentioning

confidence: 99%

“…In a symmetric case where all cities have the same allocation, this is equivalent to finding the optimal size of a city. Flatters et al (1974) considered the latter problem to obtain the first-best HGT for local public goods (called the 'golden rule' there). Because the number of cities satisfies N N n /  , we can re-express our results in terms of the optimal size of a single city by maximizing the Allais surplus ( 15 ) with respect to the population of a city:…”

Section: Proposition 2 (Optimal Number Of Cities)mentioning

confidence: 99%

“…An important preliminary step for devising such urban policies is to assess whether cities are too large or too small, and by how much. The 'golden rule' of local public finance (Flatters et al, 1974), i.e., the Henry George Theorem (henceforth HGT; Stiglitz, 1977;Arnott and Stiglitz, 1979;Kanemoto, 1980;Schweizer, 1983) provides a condition for the optimal size of a city or, equivalently, the optimal number of cities given a fixed total population. 1 It is thus a potentially useful tool that can allow policy makers to assess whether cities are too large or too small.…”

Section: Introductionmentioning

confidence: 99%

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The Henry George Theorem in a second-best world

Behrens

Kanemoto

Murata

2015

Journal of Urban Economics

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The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. We extend the HGT to distorted economies where product differentiation and increasing returns are the sources of agglomeration economies and city governments levy property taxes. Without relying on specific functional forms, we derive a second-best HGT that relates the fiscal surplus to the excess burden expressed as an extended Harberger formula.

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Section: Discussionmentioning

confidence: 99%

Section: Proposition 2 (Optimal Number Of Cities)mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Henry George Theorem in a second-best world

Behrens

Kanemoto

Murata

2015

Journal of Urban Economics

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“…The incentive equivalence result applied mainly to the efficiency of regional fiscal decision-making when regions provide local public goods for which there is no spillover. However, even if fiscal choices are efficient, migration can be inefficient, as shown by Buchanan and Goetz (1972) and Flatters, Henderson and Mieszkowski (1974). One important rationale for federal equalization transfers is to correct this inefficiency of migration.…”

Section: Introductionmentioning

confidence: 99%

Non-cooperative pollution control in an inter-jurisdictional setting

Boadway¹,

Song²,

Tremblay³

2013

Regional Science and Urban Economics

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This paper examines various circumstances under which decentralized pollution policies can be efficient both in federal settings and in multi-region settings with labour mobility. We consider a model in which pollution control policies are set by regional governments non-cooperatively and pollution damages are borne by the residents of all regions. We characterize the efficiency of pollution policies, and of population allocation among regions, in a variety of scenarios, including when pollution policies are enacted before interregional transfers are determined by the federal government and before migration occurs; when migration decisions are taken before policy decisions; in the absence of a central government if regional governments can make voluntary interregional transfers; when decisions over pollution control policies are followed by voluntary contributions by regions to a national public good; when regions can commit to matching the abatement efforts of each other; and when regions can commit to specific levels of abatement contingent on the emissions of other regions not exceeding some maximum level.

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“…However, allowing such a coalitional deviation of consumers does not fit very well with Tiebout's original tale: unlike Samuelson's pure public goods case, the market mechanism can achieve efficient allocations in equilibria even if jurisdictions cannot observe each consumer's preferences. 14 In this paper, instead of assuming entrepreneurial consumers, we assume entrepreneurial jurisdiction managers. We will use a version of the well-known equilibrium concept defined for markets with asymmetric information (adverse selection) by Rothschild and Stiglitz (1976).…”

Section: Type W Jurisdictionmentioning

confidence: 99%

Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency

Konishi

2008

Regional Science and Urban Economics

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This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's (1975 Urban Studies) elaboration of Tiebout's (1956 JPE) tale. We use a well-known equilibrium concept from Rothschild and Stiglitz (1976, QJE) in a market with asymmetric information, and show that Hamilton's zoning policy plays an essential role in proving the existence and efficiency of equilibrium. We use an idealized large economy following Ellickson, Grodal, Scotchmer and Zame (1999, Econometrica) and Allouch, Conley and Wooders (2004). Our theorem is directly applicable to the existence and efficiency of a discrete spatial approximation of mono-or multi-centric city equilibria in an urban economy with commuting time costs, even if we allow the existence of multiple qualities of (collective) residences, when externalities due to traffic congestion are not present. * I thank Jan Brueckner, John Conley, Masa Fujita, Atsushi Kajii, Kazuya Kamiya, Se-il Mun, Jaime Luque, Frederic Robert-Nicoud, Alain Trannoy, and Myrna Wooders for their comments and encouragements, and Frank Georges for his research assistance. I especially thank two anonymous referees and an associate editor of the journal for their helpful comments and suggestions. My intellectual debt to Marcus Berliant is obvious. All errors are, of course, my own.

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Public goods, efficiency, and regional fiscal equalization

Cited by 261 publications

References 1 publication

The Henry George Theorem in a second-best world

The Henry George Theorem in a second-best world

Non-cooperative pollution control in an inter-jurisdictional setting

Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency

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