Speaker: Damien Capelle (IMF)

Paper Title: The Welfare Effects of Decentralizing Public Goods (joint with Matthew Tauzer (Berkeley))

Abstract: This paper analyzes the welfare impacts of fiscal decentralization. Using detailed municipal budget data in France, we uncover significant heterogeneity in both the level and the composition of public goods across localities. We show that localities with varying income levels and population sizes systematically allocate their budgets differently across varieties of public goods. To explain these patterns, we develop a quantitative spatial equilibrium model featuring households with non-homothetic preferences over multiple public goods, heterogeneous public good rivalry, local voting on tax rates and public goods bundles, and federal transfers. Our simulations reveal significant welfare gains from decentralization, primarily driven by the ability to tailor the mix of public goods to local preferences and costs. Household mobility significantly
amplifies these gains.

Hope to see many of you there!

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