Discussion Paper No.1703
Abstract :
This paper analyzes the joint provision of local public goods and industrial distribution.
Often, when local public goods are offered in a city, the local government
in nearby regions seek to obtain a ”free ride” and make use of the public goods in
their region. If the local public goods of a city can be consumed in a nearby region,
it may be possible to provide them jointly and share the administration and cost. It
is expected of industrial dispersion to increase revenue and of local governments to
participate in joint provision voluntarily. Then, there would be no need for policy
centralization or local government consolidation.
The results depend on the population in the periphery. When the population is
large, the local government in the periphery accepts the joint provision of local public
goods regardless of the industrial location. Conversely, if the periphery population
is small, the manufacturing sector agglomerates in the city and the local government
does not want joint provision. Only when the manufacturing sector disperses and the
wages in the periphery increase sufficiently does the local government accept joint
provision.