City size and the demand for local public goods

This paper studies how size-induced cost differences in the provision of local public goods affect the efficient level of public spending. Since public goods are non-rival in consumption, the per-capita cost of a given level of public good provision is lower in more populous jurisdictions. We show that this cost advantage gives rise to a substitution of public for private consumption and specify conditions under which the efficient level of local public expenditures per capita rises with a jurisdiction's population size.