Free‐Riding and the Provision of Public Goods in the Family: A Laboratory Experiment*

We examine the provision of family public goods using experimental economics methods. With sufficient altruism and shared resource arrangements, families can provide the efficient level of family public goods. Becker's Rotten Kid Theorem asserts that transfers from altruistic parents will induce children to maximize family income even if children are not altruistic toward other family members. Consistent with altruism, parents and children contributed more to a public good when in groups with family members than when in groups with strangers. In contrast to the predictions of the Rotten Kid Theorem, however, children's behavior fell short of maximizing family income.     

Trust,ability‐to‐pay,and charitable giving

In the literature on privately provided public goods, altruism has been motivated by what contributions can accomplish (public goods philanthropy), by the pleasure of giving (warm‐glow philanthropy), or by the desire to personally make a difference (impact philanthropy). Underlying these motives is the idea that individuals trust that their donations reach their goal. We revisit these models but allow for distrust in the institutional structures involved. An important result we derive is that trust considerations determine whether crowding out is less or more than complete, and we thus open up possibilities in terms of the extent of crowding out not currently available. We also model socially motivated philanthropy when income‐heterogeneous donors take trust and ability‐to‐pay into account. With ability‐to‐pay in social motivation, an important result we obtain is that low‐income donors may contribute more than high‐income donors (in both absolute and percentage‐of‐income terms), giving a potential theoretical foundation to the frequently observed “U‐shaped” pattern of giving.     

Altruism,fertility, and the value of children: Health policy evaluation and intergenerational welfare

This paper accounts for the value of children and future generations in the evaluation of health policies. This is achieved through the incorporation of altruism and fertility in a “value of life” type of framework. We are able to express adults' willingness to pay for changes in child mortality and also to incorporate the welfare of future generations in the evaluation of current policies. Our model clarifies a series of puzzles from the literature on the “value of life” and on intergenerational welfare comparisons. We show that, by incorporating altruism and fertility into the analysis of the recent U.S. experience, the estimated welfare gain of a young adult from reductions in mortality easily doubles.     

Evaluating public goods from individual welfare functions

This paper suggests a method for evaluating public goods based directly on individual welfare functions. A hypothetical project for reducing air pollution is used as an illustration. The paper describes a technique for estimating welfare functions: the approach is applied to a limited experimental sample. The individual marginal rates of substitution between air income are then added up in order to yield estimates of values associated with air quality variations by the group under consideration. Further it is illustrated that the utilization in the aggregation process of heights based on individual differences in marginal utility of income as computed from the welfare functions, can modify the measures of social profitability and yield evaluation more consistent with basis criteria of social welfare.     

Public Goods Games,Altruism, and Evolution

I analyze the evolution of altruistic preferences in a population where individuals are matched pairwise to play a one‐shot public goods game. I determine the evolutionarily stable degree of altruism, allowing for assortative matching. The stable degree of altruism is strictly smaller than the degree of assortativity. In particular, if matching is completely random, spite is stable, and a positive degree of assortativity is necessary for pure selfishness to be stable. Furthermore, the stable degree of altruism is increasing in the degree of assortativity, and it depends on the specifics of the public goods game.     

Public goods provision,inequality and taxes

The impact of redistributive policies on voluntary contributions is still not well understood. While a higher level of redistributive taxation decreases the price of voluntary giving, it also changes the income distribution by decreasing income inequality. This paper provides a controlled laboratory experiment to investigate the net impact of the tax rate on public goods provision. The experimental findings show that while the participants decrease their voluntary contributions as the pre-tax income distribution becomes more equal, they increase their contributions with taxation. These findings have important implications for government policies regarding privately provided public goods.     

Free Riding on Altruism and Group Size

It is shown that altruism does not affect the equilibrium provision of public goods although altruism takes the form of unconditional commitment to contribute. The reason is that altruistic contributions completely crowd out selfish voluntary contributions. That is, egoists free ride on altruism. It is also shown that public goods are less likely to be provided in larger groups. The only qualification to our results is when the probability of altruism is so high that it is a dominant strategy for all egoistic players to free ride. In this case, actually, both altruism and the larger group facilitate public good provision.     

Female political representation and substantive effects on policies: A literature review

The share of women in political offices has increased considerably over the past few decades in almost every country in the world. Does this matter for policy outcomes? This is the first paper to provide a literature review on the substantive effects of female representation on policies. In developing countries, the increase in female political representation has caused a better provision of public goods, especially with regard to education and health. In developed countries, higher female representation has not affected public policies as measured by spending patterns. However, more recent evidence shows that female representation has induced changes in parliamentary deliberations and specific policy choices (e.g. more public child care) that may not be reflected in the observable composition of public spending. Finally, higher female representation has improved institutional quality by reducing corruption and rent-extraction by those in power.     

官员规模、公共品供给与社会收入差距:权力寻租的视角

官员规模、公共品供给效率以及社会收入差距是当下社会比较关注的问题,本文试图把三个问题纳入到一个故事框架下来分析和解释。生产的进行需要官员提供资源帮扶,这需要通过雇佣下级官员来做到;当私人利益进入上级官员的收益函数时,上级官员就会促使资源的供给"人为"稀缺来设租,从而便于下级官员从生产者处收取资源租金;而资源租金的收取使得下级官员的收益高于其外部选择权收益,从而增加了下级官员职位的竞争性,又由于上级官员对下级官员职位任命权的垄断,使上级官员从下级官员处收取职位租金。分析表明,权力的设租寻租行为是造成社会收入差距出现的一个重要原因;在一个能较好限制官员关注私人收益的社会中,官员规模较小、公共品供给效率较高且因权力寻租而造成的社会收入差距较小。     

The Social Marginal Valuation of Income: Australian Estimates from Government Behaviour*

Alternative public policies frequently incorporate distributional goals. The elasticity of the social marginal valuation of income, ε, can help to derive welfare weights for different individuals in different income groups. Estimates are presented of the elasticity of the social marginal valuation of income implied by the Australian personal income tax, in the period 1968–69 to 1975–76. Both equal absolute (EAS) and equal proportional sacrifice (EPS) models are used to infer the elasticity values. Using taxable income as a proxy for income, the consistent value of ε under EAS was found to range from 2.07 to 2.57; the EPS range was 1.76 to 2.40. A number of considerations suggested a best-guess magnitude of about 2.2. Caution is urged in the interpretation and use of these results.     

Opting out and topping up reconsidered: Informal care under uncertain altruism

We study the design of public long‐term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non‐linear policies where the LTC transfer depends on the level of informal care, which is assumed to be observable, while children's altruism is not. Our policy encompasses two policies traditionally considered in the literature: topping up policies consisting of a transfer independent of informal care, and opting out policies entailing a positive transfer only if children fail to provide care. We show that both total and informal care should increase with the children's level of altruism. This is obtained under full and asymmetric information. Public LTC transfers, on the other hand, may be non‐monotonic. Under asymmetric information, public LTC transfers are lower than their full information level for the parents whose children are the least altruistic, while it is distorted upward for the highest level of altruism. This is explained by the need to provide incentives to highly altruistic children. In contrast to both topping up and opting out policies, the implementing contract is always such that social care increases with informal care.     

Old‐age Social Security versus Forward Intergenerational Public Goods Provision

This paper introduces an overlapping‐generations model with earnings heterogeneity and borrowing constraints. The labour income tax and the allocation of tax revenue between social security and forward intergenerational public goods are determined in a bidimensional majoritarian voting game played by successive generations. The political equilibrium is characterized by an ends‐against‐the‐middle equilibrium where low‐income and high‐income individuals form a coalition in favour of a lower tax rate and less social security while middle‐income individuals favour a higher tax rate and greater social security. Government spending then shifts from social security to public goods provision if higher wage inequality is associated with a borrowing constraint and a high elasticity of marginal utility of youth consumption.     

Uncertainty, Commitment, and Optimal Taxation

This paper examines the optimal tax design problem in the presence of wage uncertainty. The wage has a continuous distribution, individuals are ex ante identical, preferences are separable in labor supply and goods, public policy aims at providing the population with social insurance, and the only restriction on the tax instruments is that emanating from lack of public observability of realized wages and labor supplies. We show that optimal tax structures depend crucially on whether it is labor supply or goods that consumers have to commit to before the resolution of uncertainty. Specifically, we prove that, in the absence of commitment, the social insurance problem collapses to the traditional optimal tax problem. Second, if labor supply is precommitted, it would be possible to effect a first-best outcome. Third, commitment to goods would make indirect taxation a useful instrument of tax policy even in the presence of a general income tax; it requires differential tax treatment of committed and noncommitted goods. Finally, if preferences are separable between the two types of goods, precommitted goods must be taxed at a uniform rate lower than that on the noncommitted goods.     

Agri-environmental policies in the EU and United States: A comparison

Agri-environmental policies (AEPs) in the United States and the European Union are examples of payments for environmental services that pay farmers to reduce the negative externalities of agricultural production, while serving as a means to transfer public funds to farmers. We show that despite similar origins, AEPs in the two regions differ both in their specific objectives and in their implementation. For example, AEPs in most member states of the EU-15 have the additional objective of using agriculture as a driver for rural development. This objective is achieved by compensating farmers for the private delivery of positive public goods, such as attractive landscapes, produced by agriculture. The rationale is market failure, and there is empirical evidence that Europeans are willing to pay for such positive externalities. No comparable provision exists in U.S. policy. By contrast, U.S. AEPs focus almost entirely on reducing agriculture's negative externalities, such as soil erosion. Second, we find that U.S. programs are more targeted than their EU counterparts, and take opportunity cost into account. The EU programs, on the other hand, address a wider range of externalities, and are focused more on the paying for a particular farming process than reducing specific negative externalities. The EU takes a broader view of AEPs than does the United States, both in terms of type of activity that can be funded, and by using less targeting by land characteristics, and so the European program could be more easily used as a mechanism for transferring income to producers. Despite this, we find evidence that many of the amenities targeted by the programs are demanded by the population.     

ALTRUISM,EGOISM, AND THE ROLE OF SOCIAL CAPITAL IN THE PRIVATE PROVISION OF PUBLIC GOODS*

The economic approach to understanding human behavior has encountered serious difficulties when attempting to explain the private provision of public goods, such as voting and charitable contributions to large organizations. To gain insights into these important issues, this study takes an interdisciplinary approach. The individual is modeled formally in terms of dual egoistic/altruistic utilities, and the recursive relation between altruism and the existence and production of social capital is developed. The model is analyzed as a non-cooperative game between the egoistic and altruistic selves. The socialized rational actor that results from the combination of social capital, dual utilities, and non-cooperative behavior resolves a number of public goods paradoxes. Comparative statics and the dynamics of social capital formation are explored.     

Optimal Fiscal Policies,Congestion and Over‐entry*

By shedding light on market imperfections and the congestion of public goods, we show that free entry in a market equilibrium will lead to excessive entry relative to the social optimum. Moreover, by specifying a generalized congestion function, it is also shown that different fiscal policies, including labor income tax, capital income tax and government expenditure, play a distinct role in terms of remedying market distortions. Specifically, optimal income taxes decrease with the degree of market imperfections in order to remove the monopoly inefficiency, while they increase with the degree of congestion in order to remedy the adverse externality caused by congestion distortion. Since a higher degree of increasing returns to an expansion in the variety of intermediate goods is found to intensify the congestion effect of government infrastructure expenditure, the optimal rule of government expenditure proposed by Barro (1990) should be modified.     

Public pensions and growth

This paper investigates the relationship between the size of an unfunded public pension system and economic growth in an overlapping generation economy, in which altruistic parents finance the education of their children and leave bequests. Unlike the existing literature, we model intergenerational altruism by assuming that children's income during adulthood is an argument of parental utility. Unfunded public pensions can promote growth when families face liquidity constraints preventing them from investing optimally in the education of their children. We consider two alternative ways of financing a public pension system, either by levying social contributions in a lump-sum manner or in proportion to labour income. We find that there is no case for unfunded public pensions in economies where bequests are operative. By contrast, there exists a growth-maximising size of the public pension system in economies where bequests are not operative and individuals are sufficiently patient.     

Asymmetric Decentralization,Intergovernmental Transfers,and Expenditure Policies of Local Governments

Although China’s asymmetric fiscal decentralization system has been criticized for many years, there have been few studies giving direct evidence of its negative incentives on local government spending policies. By introducing the mechanism of asymmetric decentralization and fiscal transfers to the objective function of local government, this paper studies the incentive effects of asymmetric decentralization and fiscal transfers on spending policies of local governments, and uses the provincial panel data to carry out an empirical test. The conclusion shows that the asymmetric decentralization significantly weakens the incentives of local government to increase social expenditure, and as a solution to asymmetric decentralization, fiscal transfers fail to play a good role. Due to the relatively large income effect, the financing mechanism of fiscal transfers not only significantly reduces the incentives of local government to provide social public goods, but also weakens the constraint effect of fiscal competition on expenditure policies of local governments because of the increase in the relative cost. Although the distribution mechanism of fiscal transfers has a significant positive incentive to local government in regions where the net inflow of fiscal resources is more than zero, because of common pooling effects, the comprehensive effects of fiscal transfers in the distribution of incentives of local governments to provide social public goods are negative in all regions.     

Optimal Income Taxation and Public Good Provision with Endogenous Interest Groups

This paper studies public goods provision when agents differ in earning abilities as well as preferences. Heterogeneity in skills makes redistribution desirable and generates an equity-efficiency trade-off. If tax revenues are devoted to a public good, this trade-off is affected in such a way that income transfers are less desirable. High-skilled individuals thus have an incentive to exaggerate their preferences for public goods. Analogously, low-skilled individuals lobby against public good provision. A requirement of collective incentive compatibility eliminates these biases. It implies that income transfers are increased whenever a public good is provided and are decreased otherwise.     

Public Preferences and Private Choices: Effect of Altruism and Free Riding on Demand for Environmentally Certified Pork

Sales of private goods with affiliated public good attributes have markedly risen in recent years. This fact is difficult to explain within the paradigm of purely self-interested behavior. This paper investigates factors influencing consumer demand for pork products with certifications related to the environment, animal welfare, and antibiotics. Using psychometric scaling techniques, we measure individuals’ degree of altruism and propensity toward free riding. Results of a random parameter logit model applied to choice data obtained from a nationwide survey in the United States indicates that more altruistic individuals are willing to pay more for pork products with public good attributes than less altruistic individuals and free riders. These results indicate that private purchases of goods with public-good attributes are not simply a result of individuals’ perceptions of the ability to mitigate private risks such as food safety, but that individuals are making private choices to affect public outcomes. Results have implications for policy makers weighing the relative costs and benefits of food labeling policies versus bans related to certain livestock production practices.