Endogenous free riding and the decentralized user-fee financing of spillover goods in a n-region economy
Journal
International Tax and Public Finance
ISSN
0927-5940
ISSN-Digital
1573-6970
Type
journal article
Date Issued
2013-04
Author(s)
Abstract
The paper analyzes the strategic effects of decentralized user-fee and enforcement
policies for the financing of interregional spillover goods. We derive the equilibrium pricing and enforcement rules for a n-region economy.We show that under mild conditions on the pattern of substitution between spillover goods and contrary to the 2-region case, the decentralized equilibrium cannot be Pareto improved by coordinated policy changes. However, decentralized equilibria are suboptimal from the point of view of utilitarian welfare.We characterize the direct on of the distortion for this case. The regions' incentives for user-fee enforcement are ambiguous in general. With only two regions and if regions only charge non-residents, however, there is overinvestment in user-fee enforcement in the decentralized equilibrium. For the case of a Tullock enforcement function and linear demand for the spillover goods we show that welfare is u-shaped in a parameter that measures the technological advantage of user-fee enforcement.
policies for the financing of interregional spillover goods. We derive the equilibrium pricing and enforcement rules for a n-region economy.We show that under mild conditions on the pattern of substitution between spillover goods and contrary to the 2-region case, the decentralized equilibrium cannot be Pareto improved by coordinated policy changes. However, decentralized equilibria are suboptimal from the point of view of utilitarian welfare.We characterize the direct on of the distortion for this case. The regions' incentives for user-fee enforcement are ambiguous in general. With only two regions and if regions only charge non-residents, however, there is overinvestment in user-fee enforcement in the decentralized equilibrium. For the case of a Tullock enforcement function and linear demand for the spillover goods we show that welfare is u-shaped in a parameter that measures the technological advantage of user-fee enforcement.
Language
English
Keywords
Public goods
Club goods
Contests
Fiscal federalism
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Springer Science
Publisher place
New York
Volume
20
Number
2
Start page
169
End page
191
Pages
23
Subject(s)
Division(s)
Eprints ID
223615