DeutschClear Cookie - decide language by browser settings
Fenge, Robert; Meier, Volker (2001): Why Cities Should not be Subsidized. CESifo Working Paper, 546
WarningThere is a more recent version of this item available.
Full text not available from 'Open Access LMU'.


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.

Available Versions of this Item