The effect of spillovers on the provision of local public goods

Abstract

This paper analyzes the provision of local public goods with positive spillovers across jurisdictions. If spillovers are symmetric, the noncooperative game played by jurisdictions admits a unique equilibrium, and an increase in spillovers reduces the total provision of public goods. Smaller jurisdictions always reduce their contribution, but larger jurisdictions can increase their contribution. When spillovers are asymmetric, equilibrium is unique if spillovers are low, while multiple equilibria exist for high spillover values. In the case of two jurisdictions, an increase in the flow of spillovers to one jurisdiction benefits agents from that jurisdiction but harms agents in the other jurisdiction. Beyond the case of two jurisdictions, the effect of changes in spillovers cannot be signed. An increase in the spillovers flowing to a jurisdiction can actually result in an increase in the supply of public goods by that jurisdiction and harm agents residing in it, while benefiting agents in the other jurisdictions. The results of the paper reveal the complexity of interactions that will plague the design of institutions for multijurisdictional local public good economies with spillovers.

Leadership in Public Good Provision: A Timing Game Perspective

“…Thus, the standard formalization of interjurisdictional interactions corresponds to the case where i 2 (·) > 0 and i 12 (·) < 0 (for any i ∈ {A, B}). Under these assumptions, Bloch and Zenginobuz (2007) extend the analysis of the issue of local public good provision with spillovers and highlight their effects. Ellingsen (1998), Redoano and Sharf (2004), and Alesina et al (2005) consider the issues of international agreements or centralization under similar assumptions.…”

Local environmental quality and heterogeneity in an OLG agent-based model with spatial externalities

“…Our result is also in line with Corazzini and Gianazza ( 2008 ), who study a model where agents are distributed over a circle and contiguous agents interact locally, showing how high levels of preference for the environmental good are a vehicle for a stable Nash equilibrium. Considering the provision of public goods in a context of positive spillovers between jurisdictions, Bloch and Zenginobuz ( 2007 ) study a non-cooperative game between jurisdictions in which levels and asymmetries among spillovers play a key role in determining the value of the Nash equilibrium. With respect to this work, our model (i) allows us to observe that the equilibrium not only changes as the spillovers between interacting cells in the neighborhood vary, but for sufficiently high values of these spillovers the equilibrium loses stability; (ii) reinforces, in a dynamic context, the complexity result found by the authors regarding equilibrium levels for the provision of public goods when n jurisdictions (with ) are assumed.…”

This Town Ain't Big Enough? Quantifying Public Good Spillovers

“…However, Bewley (1981) provides a formal treatment of Tiebout's ideas and concludes that this efficiency result only holds when assuming away interesting features such as spatial spillovers and agglomeration externalities. Following Oates (1972), a rich theoretical literature investigates the consequences of spillovers on local public good provision and efficient federalism (e.g., Gordon 1983;Wellisch 1994;Conley and Dix 1999;Lockwood 2002;Besley and Coate 2003;Bloch and Zenginobuz 2007;Cheikbossian 2008;Bloch and Zenginobuz 2015).…”