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Decentralized Road Investment and Pricing in a Monocentric, Multi-Jurisdictional City: Efficiency with Spillovers

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  • Jan K. Brueckner

Abstract

This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. This conclusion is closely tied to the famous self-financing theorem of transportation economics.

Suggested Citation

  • Jan K. Brueckner, 2013. "Decentralized Road Investment and Pricing in a Monocentric, Multi-Jurisdictional City: Efficiency with Spillovers," CESifo Working Paper Series 4473, CESifo.
    • Handle: RePEc:ces:ceswps:_4473
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    References listed on IDEAS

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    1. Hikaru Ogawa & David E. Wildasin, 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," American Economic Review, American Economic Association, vol. 99(4), pages 1206-1217, September.
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    3. Wheaton, William C., 1998. "Land Use and Density in Cities with Congestion," Journal of Urban Economics, Elsevier, vol. 43(2), pages 258-272, March.
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    5. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    6. Kanemoto, Yoshitsugu, 1977. "Cost-benefit analysis and the second best land use for transportation," Journal of Urban Economics, Elsevier, vol. 4(4), pages 483-503, October.
    7. Anas, Alex & Pines, David, 2008. "Anti-sprawl policies in a system of congested cities," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 408-423, September.
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    More about this item

    Keywords

    spillovers; congestion; self-financing theorem;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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