INTERREGIONAL SPILLOVERS IN THE PRESENCE OF PERFECT AND IMPERFECT HOUSEHOLD MOBILITY

When households are immobile across regions, the decentralized provisi on of public goods that generate interregional benefit spillovers is i nefficiently low. We analyze this problem in an environment of interre gional household migration and obtain the following results: if househ olds are perfectly mobile across regions, then the decentralized provi sion of public goods generating spillovers is socially efficient. Ther e is no need for central government intervention. If households are at tached to particular regions for cultural or nationalistic reasons, ho wever, at least one of two regions undersupplies the public good. Cent ral government intervention can enhance efficiency.