We show that space matters in designing the optimal provision of local public goods (LPGs). Geography imposes particular institutional structure of local governments due to the overlapping of market areas associated with different LPGs. The optimum can be decentralized through local governments...

This paper follows Hochman, Pines and Thisse (1995) in portraying metropolitan areas as a complex of spatial clubs. Adopting this perspective, the paper characterizes the role of urbanization economies in the agglomeration of non-residential activities inside metropolitan areas.