This paper is concerned with the question of what extent population size and density affect the cost of providing public services at the subnational level. Empirical estimates of cost functions are obtained from an analysis of the expenditures of German states disaggregated into about 40 government functions. the empirical results indicate that, generally, there is no significant relationship between population density and the cost of providing public goods. At the same time, cost is almost proportionately related to population size, indicating that goods and services provided by the German states display only a limited degree of publicness.
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