Endogenous local public good prices in decentralised economies with population mobility and inter-regional transfers
Access Status
Authors
Date
2015Type
Metadata
Show full item recordCitation
School
Collection
Abstract
Economic models of regional economies with local public goods, corrective inter-regional transfers and population mobility assume decision-makers are small price takers. We argue this is reasonable for private goods but that local public good prices are in fact endogenous, varying with settlement patterns and hence regional/central policies. Decision-makers should therefore be modelled as having the power to distort policies in order to manipulate public good prices. We show that incentive equivalence in regional economies is sufficient to ensure that known efficiency results, whether the transfer is assigned to regions or the centre, are undisturbed by endogenous local public good prices. However, the corrective inter-regional transfer now includes input price externalities arising from migration which are not accounted for in price taking models. Hence, allowing for endogenous local public good prices extends what we know about the theory of corrective inter-regional transfers.
Related items
Showing items related by title, author, creator and subject.
-
Petchey, Jeffrey (2009)This paper shows that regional economies, such as federations or unitary countries with sub-national governments, may need a system of optimal inter-regional transfers to correct for various types of externalities related ...
-
Petchey, Jeffrey (2016)The point of this paper is to show that under a certain set of highly plausible circumstances, the well-known fiscal equalisation transfer required to establish spa- tial efficiency in federations, regional unions of ...
-
Petchey, Jeffrey (2017)Inter-regional transfers and the induced under-taxation of economic rents. Regional Studies. This paper shows that if taxes on economic rent are assigned to anticipatory first-moving regions and inter-regional transfers ...