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Capitalization, Decentralization, and Intergenerational Spillovers in a Tiebout Economy with a Durable Public Good

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  • John P. Conley

    (Vanderbilt University)

  • Robert Driskill

    (Vanderbilt University)

  • Ping Wang

    (Washington University)

Abstract

We consider an overlapping generations model with a Durable Local Public Good (DLPG). We establish a Tiebout Theorem (equilibrium exists and is first best) as well as a Second Welfare Theorem in this dynamic DLPG economy. We de...ne conditions under which local provision of durable public goods results in the full internalization of the intergenerational spillovers that durability entails. In contrast, when durable public goods are provided by the national government, internalization does not take place and underprovision of public goods results. This sets up an institutional tradeoff between national and local provision of public goods that balances the relative strength of intergenerational and interjurisdictional spillovers.

Suggested Citation

  • John P. Conley & Robert Driskill & Ping Wang, 2017. "Capitalization, Decentralization, and Intergenerational Spillovers in a Tiebout Economy with a Durable Public Good," Vanderbilt University Department of Economics Working Papers 17-00003, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-17-00003
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    More about this item

    Keywords

    Durable Local Public Goods; Capitalization and Intergenerational Spillover E¤ects; Dynamic Tiebout Equilibrium; Welfare Analysis.;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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