The Economics of the Local Public Sector
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Description
This chapter discusses the demand side of the public sector and focuses on normative rather than positive models. The political economy of the local public sector has been studied by both political scientists and economists, but efforts to combine the two have had limited success. The addition of supply-side-political assumptions to Tiebout models has led largely to negative conclusions about the existence and efficiency of the local public competitive analogy. The Tiebout model has provided one useful, albeit somewhat artificial, model of a more or less competitive local public sector. However, the value and usefulness of the Tiebout model is likely to diminish in the future, and an alternative or alternatives are needed. Several monopoly models of local government have been suggested to provide a useful counterpart to the Tiebout approach. Public goods are viewed as brands that differ in one or more of the attributes. The extent to which local governments compete among themselves in the supply of the public good becomes issues that are studied using modern techniques of industrial organization. Local public economics is a subject area that is rich with empirical work, but a good deal of high quality work remains to be undertaken. The relationship between the mobility of households and the provision of local public services is one area that typifies work in local public finance. A well-specified and correctly estimated model helps to evaluate the correct method by which the demands for local public goods are determined.
Source Publication
Handbook of Public Economics
Source Editors/Authors
Alan J. Auerbach, Martin Feldstein
Publication Date
1987
Volume Number
2
Recommended Citation
Rubinfeld, Daniel L., "The Economics of the Local Public Sector" (1987). Faculty Chapters. 1868.
https://gretchen.law.nyu.edu/fac-chapt/1868
