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Should a non-rival public good always be provided centrally

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  • Nicolas Gravel
  • Michel Poitevin

Abstract

This paper discusses the problem of optimal design of a jurisdiction structure from the view point of a welfarist social planner when households with identical utility functions for non-rival public good and private consumption have private information about their contributive capacities. It shows that the superiority of a centralized provision of a non-rival public good over a federal one does not always hold. Specifically, when differences in households contributive capacities are large, it is better to provide the public good in several distinct jurisdictions rather than to pool these jurisdictions into a single one. In the specific case where households have logarithmic utilities, the paper provides a complete characterization of the optimal jurisdiction structure in the two-type case. "C'est pour unir les avantages divers qui résultent de la grandeur et de la petitesse des nations que le fédératif a été créé." (Alexis de Toqueville)
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Suggested Citation

  • Nicolas Gravel & Michel Poitevin, 2015. "Should a non-rival public good always be provided centrally," CIRANO Working Papers 2015s-53, CIRANO.
    • Handle: RePEc:cir:cirwor:2015s-53
    as

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    File URL: https://cirano.qc.ca/files/publications/2015s-53.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Federalism; jurisdictions; asymmetric information; equalization; second best; public goods; city mergers;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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