Congestion in the Consumption of General Government Services Provided by the Australian States and Localities

The paper estimates a parameter that captures congestion in the consumption of general government services provided by Australian state and local governments. From this estimate, the per person cost of general government services is shown to be an increasing function of population size, suggesting a form of decreasing returns to population. Larger states therefore have higher per person costs attributable to population size and congestion relative to smaller states. As these cost differences are compensable under the GST allocation arrangements the paper also develops congestion cost disabilities which could be integrated into the GST distribution model