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The Contest for a Local Public Good or ‘Bad’

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  • Jinwon Ahn
  • Hee-Guon Shin

Abstract

This study investigates game-based PIMFY models for analyzing the interactions among grant-seeking local governments and the central government. From these models we could find the following. The effective prize dissipation ratio in each local government multiplied by its population is the same in two competing local governments – in the first case, of equal valuation and equal cost functions, and in the second case, of equal valuation and asymmetric cost functions. If the central government uses a policy to strengthen cost advantage in favor of the low cost local government, then economic inefficiency in terms of aggregate outlays will decrease. If there a binding constraint on outlay by local government 1 is assigned by the central government, then at the binding level of outlay, local government 2’s new equilibrium level needs to be calculated and it will be smaller than the equilibrium level without the binding constraint.

Suggested Citation

  • Jinwon Ahn & Hee-Guon Shin, 2009. "The Contest for a Local Public Good or ‘Bad’," International Review of Public Administration, Taylor & Francis Journals, vol. 14(1), pages 43-50, May.
    • Handle: RePEc:taf:rrpaxx:v:14:y:2009:i:1:p:43-50
    DOI: 10.1080/12294659.2009.10805146
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