Swimming Pool Versus Art Museum: Efficiency in the Provision of Local Public Facilities with Heterogeneity

This paper follows an approach adopted by Cremer, Marchand and Pestieau (1997) to analyze efficiency in the provision of heterogeneous local public facilities. Even when spillovers exist, under certain conditions the local government could still reach the optimum provision of the local public good, otherwise there is under-provision. Secondly, relaxing the non-excludability assumption, provision efficiency could be achieved if the local governments collect the service fees based on the neighboring community user's net marginal willingness to pay. If not, the service fee mechanism would not always be able to eliminate the preexisting allocation inefficiency and could sometimes lead to increased inefficiency due to overprovision of the public good.