We setup a simple theoretical model where a local public good is provided and its e¤ect is spread onto the utility of citizens belonging to the neighboring jurisdiction, moreover the neighboring jurisdiction enjoys a production externality which allows to decrease the production cost of its own public good: the mix of both e¤ects lead to a strategic interaction between the two jurisdictions depending on jurisdiction’s size. We test the model by using financial and socio-economic data of the Italian province of Trento. In particular we estimate determinants of infrastructure stock by explicitly introducing the spatial lag and exploring its di¤erential impact according to the population size of the considered municipality. We find that jurisdictions positively react to an increase in infrastructure, but the e¤ect tends to vanish after a given population threshold.
Local infrastructure and externalities: does the size matter?
FERRARESI, Massimiliano;RIZZO, Leonzio Giuseppe
2012
Abstract
We setup a simple theoretical model where a local public good is provided and its e¤ect is spread onto the utility of citizens belonging to the neighboring jurisdiction, moreover the neighboring jurisdiction enjoys a production externality which allows to decrease the production cost of its own public good: the mix of both e¤ects lead to a strategic interaction between the two jurisdictions depending on jurisdiction’s size. We test the model by using financial and socio-economic data of the Italian province of Trento. In particular we estimate determinants of infrastructure stock by explicitly introducing the spatial lag and exploring its di¤erential impact according to the population size of the considered municipality. We find that jurisdictions positively react to an increase in infrastructure, but the e¤ect tends to vanish after a given population threshold.I documenti in SFERA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
