Arbeitspapier

Why Cities Should not be Subsidized

The paper deals with the question of whether fiscal transfers re-ceived by cities can be justified by a higher cost of producing publicly provided goods. In the model, increasing the population density implies both a higher output per capita due to agglomeration economies and a higher cost of the publicly provided good due to congestion. It is shown that introducing fiscal transfers to be paid by the region with the lower population density will generally reduce welfare. This result is obtained since the city is already beyond the level of optimum agglomeration.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 546

Classification
Wirtschaft
Subject
interjurisdictional transfers
congestion
publicly provided goods

Event
Geistige Schöpfung
(who)
Fenge, Robert
Meier, Volker
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2001

Handle
Last update
10.03.2025, 11:46 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Fenge, Robert
  • Meier, Volker
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2001

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