Local Infrastructures and Externalities: Does the Size Matter?
IEB Working Paper No. 2014/37
36 Pages Posted: 18 Mar 2015
Date Written: January 12, 2015
We setup a model in which the residents of two neighboring municipalities can use the services provided by public infrastructures located in both jurisdictions. If services are either complements or substitutes in use, the municipalities strategically interact when investing in infrastructures; moreover, when they differ in population size, the small municipality reacts more to the expenditure of its neighbor than the big one. The theoretical predictions are then tested by estimating the determinants of the stock of public infrastructures of the municipalities belonging to the Autonomous Province of Trento, in Italy.
Keywords: Local public goods spillovers, spatial interactions, size of local jurisdictions
JEL Classification: D72, H61, H77
Suggested Citation: Suggested Citation