In the presence of spillovers, decentralized provision of local public goods may lead to a higher surplus than centralized provision even though localities have identical preferences. Indeed, free-riding costs associated to decentralization can be lower than the costs of rent-seeking and influence activities under centralization. Actually, centralization yields a higher level of regional surplus only if both the spillover effect from local public spending is sufficiently large and the elasticity of the influence function is sufficiently small.

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We revisit the group size paradox in a model where two groups of di¤erent sizes compete for a prize exhibiting a varying degree of rivalry and where group e¤ort is given by a CES function of individual e¤orts. We show that the larger group can be more successful than the smaller group if the degree of complementarity is su¢ ciently high relative to the degree of rivalry of the prize.