Influence Costs in the Provision of Local Public Goods

Duke University, Economics Working Paper No. 01-02

33 Pages Posted: 12 May 2003

See all articles by Gregory Besharov

Gregory Besharov

Duke University, Fuqua School of Business-Economics Group

Date Written: November 18, 2002

Abstract

Studies of federalism often assume that a central government's policy choices are exogenously restricted to be uniform across political subdivisions. Drawing from the literature on contracts and organization, this paper provides a justification for the much-criticized assumption. Though restrictions may reduce policy efficiency, they may reduce influence costs - resources used to influence policy - even more. The restrictions considered are on the central government's taxation and local public good provision in a menu auction lobbying framework, with localized provision a special case. When preferences and optimal policies are similar across jurisdictions, uniformity constraints enhance welfare. When spillovers are low, local provision is optimal. In other cases, uniformity restrictions reduce welfare as critics have stated.

Keywords: federalism, local public goods, influence costs

JEL Classification: H1, H41

Suggested Citation

Besharov, Gregory Mark, Influence Costs in the Provision of Local Public Goods (November 18, 2002). Duke University, Economics Working Paper No. 01-02, Available at SSRN: https://ssrn.com/abstract=381301 or http://dx.doi.org/10.2139/ssrn.381301

Gregory Mark Besharov (Contact Author)

Duke University, Fuqua School of Business-Economics Group ( email )

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