The utility of residents in a rural village, which is part of a dual-tier sub-national government structure, is composed of the utility of consuming private goods, which is proportional to their income before local taxes, and the utility from regional public goods less the cost of providing these goods. This utility can be represented as follows:where U(G) describes the benefit from the consumption of regional public goods (G). This variable increases by G and is differentiable.W(s,p) describes the income available before local taxes for the consumption of private goods. It increases by the socio-economic index (s) and the periphery index (p). As we compare identical villages, which are either in a unitary structure or part of a dual-tier structure, W(s,p)is not a function of G, N, or V.C() describes the cost function of providing regional public goods, C(G, N, D, V)increases with all its variables: Gpublic goods, Nnumber of citizens, Dthe distance between villages, Vnumber of villages in a regional council.

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