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Discussion Paper Details

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Title: On the Optimal Structure of Local Governments

Author(s): Oded Hochman, David Pines and Jacques-François Thisse

Publication Date: March 1994

Keyword(s): Land Rent, Local Public Goods, Metropolitan Governments and Transportation Costs

Programme Area(s): Applied Macroeconomics

Abstract: We show that space matters in designing the optimal provision of local public goods (LPGs). Geography imposes particular institutional structure of local governments due to the overlapping of market areas associated with different LPGs. The optimum can be decentralized through local governments that have jurisdiction over market areas of all LPG-types. This implies that the appropriate suppliers of LPGs are metropolitan approach invalidates the prevailing theory of fiscal federalism, according to which a layer of government should be established for each type of LPG.

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Bibliographic Reference

Hochman, O, Pines, D and Thisse, J. 1994. 'On the Optimal Structure of Local Governments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=899