No abstract

Complementarity, Fiscal decentralization, Economic growth, O40, H77,

No abstract

We examine the welfare effects of a central government's subsidy for a local public good in a Nash equilibrium model with two types of public goods. We first show that the welfare effect depends on the substitution and evaluation effects. We also investigate the optimal subsidy rate in a second-best framework and explore how the optimal subsidy scheme depends on the relative evaluation of the two types of public goods. Copyright Springer-Verlag Berlin Heidelberg 2002Key words: Local public good, central public good, subsidy, Lindahl price criterion, JEL Classification: H23, H41, H71,