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Central government subsidies to local public goods

Author

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  • Nobuo Akai
  • Toshihiro Ihori

Abstract

We examine the welfare effects of a central government's subsidy for a local public good in a Nash equilibrium model with two types of public goods. We first show that the welfare effect depends on the substitution and evaluation effects. We also investigate the optimal subsidy rate in a second-best framework and explore how the optimal subsidy scheme depends on the relative evaluation of the two types of public goods. Copyright Springer-Verlag Berlin Heidelberg 2002

Suggested Citation

  • Nobuo Akai & Toshihiro Ihori, 2002. "Central government subsidies to local public goods," Economics of Governance, Springer, vol. 3(3), pages 227-239, November.
    • Handle: RePEc:spr:ecogov:v:3:y:2002:i:3:p:227-239
    DOI: 10.1007/s101010200048
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    Citations

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    Cited by:

    1. Kothenburger, Marko, 2007. "Ex-post redistribution in a federation: Implications for corrective policy," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 481-496, April.
    2. Nobuo Akai & Kazuhiko Mikami, 2005. "On Fiscal Federalism under Democracy," CIRJE F-Series CIRJE-F-313, CIRJE, Faculty of Economics, University of Tokyo.
    3. Hikaru Ogawa, 2006. "Tax competition, spillovers, and subsidies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(4), pages 849-858, December.
    4. Toshikazu Ohsawa & Tong Yang, 2022. "Productive effects of public spending, spillovers, and optimal matching grant rates," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-8, December.

    More about this item

    Keywords

    Key words: Local public good; central public good; subsidy; Lindahl price criterion; JEL Classification: H23; H41; H71;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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