WHAT DO CITIZENS THINK ABOUT PUBLIC ENTERPRISES? SUBJECTIVE SURVEY DATA ON THE LEGITIMACY OF THE ECONOMIC ACTIVITIES OF THE GERMAN PUBLIC SECTOR

We analyse the legitimacy of public enterprises that perform economic activities by focusing on the citizens’ subjective preferences, i.e. determining their political legitimacy. Using data from a representative survey conducted among 318 citizens of the German state of Rhineland‐Palatine, we explore determinants for the support of either privatisation efforts or the instrumental thesis, a widespread principle in German‐speaking countries, which considers public enterprises solely as instruments to fulfil economic policy objectives. Our results indicate that the respondents’ perception of the efficiency of public enterprises as well as their personal economic situation are important factors for the support of privatisation. The influential factors for the use of public enterprises as policy instruments are political ideology, the perception of a higher security of supplying goods and services as well as opinions regarding corporate social responsibility. The subjective preferences of a (democratic) country's citizens are thus an important reason why the public sector should or should not play an active part in providing goods and services. This can play an important role when decision makers from the public sector are keen to take into account the citizens’ approval or disapproval of privatisation measures.     

‘Us’ and ‘Them’: the origin of identity,and its economic implications

Abstract We investigate the origins of identity and the innate proclivity to draw a distinction between ‘insiders’ and ‘outsiders’. We propose an evolutionary explanation: we argue that identity arises because it facilitates survival. In an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would distinguish between insiders and outsiders. We then work out the implications of such preferences in two contemporary scenarios, one entailing rent‐seeking behaviour and the other involving public good provision. Our results are in conformity with empirical evidence.     

The impact of targeting policy on spouses’ demand for public goods,labor supplies and sharing rule

This paper studies the impact of targeted unconditional cash transfers on the spouses’ demand for public goods, labor supplies and sharing of resources. We estimate a collective labor supply model with distributional factors which is extended to include preferences over marketable public goods (including child goods). In this way, unlike previous research, we consider the impact of such transfers on the intrahousehold allocation of resources and distinguish between the labeling and recipient effects. We exploit the UK experience and find evidence in favor of the collective model with separable preferences over labor supplies and public goods. This finding implies a recipient effect and not a labeling effect of child benefits. Given the household’s unearned income, the bigger the wife’s bargaining power, the more the resources allocated to public goods (including child goods) and the wife’s private consumption. The results can be useful in the design of family policy which aims to improve the relative welfare of children within the family and alleviate any intrahousehold consumption inequalities.     

On the evolution of conditional cooperation

A long series of laboratory and field experiments, as well as conventional empirical studies, has established that (1) individuals voluntarily provide themselves with public goods at levels exceeding those predicted by the Nash voluntary contributions mechanism, and (2) agents reciprocate increases in the contributions of their counterparts in such settings (conditional cooperation). This paper presents a simple model of the evolution of preferences for conditional cooperation in the presence of a public good, which explains these two empirical findings without employing reputational or group selection arguments. In this model, individuals inherit preferences to match other agents' contributions to the provision of a public good, at some specified “matching rate.” Agents whose preferences induce them to be relatively successful – in material terms – increase in number, from one generation to the next. Under complete information and with randomly matched groups of N agents who have quasilinear preferences over the public good and a private good, the unique evolutionarily stable matching rate is 1, leading to Pareto optimal voluntary provision of the public good, regardless of group size N. The evolutionarily stable matching rate can be viewed as an endogenous social norm.     

Heterogeneous preferences and in-kind redistribution: Theory and evidence

This paper examines the impact of social heterogeneity on in-kind redistribution. We contribute to the previous literature in two ways: we consider (i) the provision of several public goods and (ii) agents different not only in income, but also in their preferences over the various goods provided by the public sector. In this setting, both the distribution and size of goods provision depend on the heterogeneity of preferences. Our main result is that preference heterogeneity tends to decrease in-kind redistribution, while income inequality tends to increase it. An empirical investigation based on United States Census Bureau data confirms these theoretical findings.     

The Political Economy of the Global Environment

Issues of the ‘global commons’ have secured a prominent place in environmental discourse. The temperature-regulating functions of the global atmosphere and radiation control functions of stratospheric ozone offer clear examples of true public goods. Other environmental assets, such as biodiversity and forests, are treated as if they are public goods, but in reality are complex mixtures of private goods, local public goods and global public goods. The approach to the provision and protection of these goods has tended to focus on the development of international agreements, such as those at the Rio de Janeiro ‘Earth Summit’ in 1992. But do these agreements contain the relevant incentives to conserve the global commons? Much depends on one's view of human nature. The Scottish economic tradition suggests that unless incentives focus on ‘self love’, as postulated by Hume and Smith, improvements will, at best, be marginal. A richer array of policy measures is obtained by analysing the potential for ‘global bargains’, trades that improve the environment whilst making each party better off. The souls of Hume and Smith surely approve recent developments in practical global bargains.     

Public goods and the value of product quality regulations: the case of food safety

The paper examines preferences for product quality regulations. Our premise is that preferences for product quality regulations derive from preferences for both private and public goods. The model is used to explain public attitudes toward a referendum measure to eliminate pesticide residues on food. Results from a survey of consumers are consistent with the conceptual model and show that preferences for public goods influence support for the product quality regulation. The results help explain why consumption behavior is a poor predictor of political behavior, and have implications for methods that use voting and market behavior to value public goods.     

Taxes or Fees? The Political Economy of Providing Excludable Public Goods

This paper provides a positive analysis of public provision of excludable public goods financed by uniform taxes or fees. Individuals differing in preferences decide, using majority rule, the provision level and financing instrument. The decisive voter has median preferences in a tax regime, but generally has above median preferences in a fee regime. Numerical solutions indicate that populations with uniform or left‐skewed distributions of preferences choose taxes, while a majority coalition of high‐ and low‐preference individuals prefer fees when preferences are sufficiently right skewed. Public good provision and welfare under fees exceeds that under taxes in the latter case.     

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.     

Social network and private provision of public goods

Using a simple model with interdependent utilities, we study how social networks influence individual voluntary contributions to the provision of a public good. Departing from the standard model of public good provision, we assume that an agent’s utility has two terms: (a) ‘ego’-utility derived from the agent’s consumption of public and private goods, and (b) a social utility which is the sum of utility spillovers from other agents with whom the agent has social relationships. We establish conditions for the existence of a unique interior Nash equilibrium and describe the equilibrium in terms of network characteristics. We show that social network always has a positive effect on the provision of the public good. We also find that, in networks with “small world”-like modular structures, ‘bridging’ ties connecting distant parts of social network play an important role inducing an agent’s contribution to public good. Assumptions and results of the model are discussed in relation to the role of social capital in community-level development projects and to the effect of innovation networks on firms’ R&D investments.     

On economic games which are not necessarily superadditive: Solution concepts and application to a local public good problem with few a agents

Core-like solution concepts based on stable coalition structures are studied in the context of games which are not necessarily superadditive. It is shown that a simple economic model involving local public goods financed by wealth taxes has this characteristic.     

Toward an efficiency rationale for the public provision of private goods

Public provision of a private goods is justified on efficiency grounds in a model with no redistributive preferences. A government’s involvement in the provision of a private good generates information about preferences that facilitates more efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is always fulfilled under independence and satisfied for an open set of joint distributions. The efficiency gains require that consumers cannot arbitrage the publicly provided private good, so our analysis applies to private goods where it is easy to keep track of the ultimate user, such as schooling and health care, but not to easily tradable consumer goods.     

Framing and free riding: emotional responses and punishment in social dilemma games

In this paper, we report an experimental investigation of the effect of framing on social preferences, as revealed in a one-shot linear public goods game. We use two types of indicator to measure social preferences: self-reported emotional responses; and, as a behavioural indicator of disapproval, punishment. Our findings are that, for a given pattern of contributions, neither type of indicator depends on the Give versus Take framing that we manipulate. To this extent, they suggest that the social preferences we observe are robust to framing effects.     

On the set of Pareto efficient allocations in economies with public goods

Summary We examine the set of Pareto-efficient allocations in economies with public goods. We show that even if preferences are continuous and strongly monotonic, it need not coincide with the set of weakly efficient allocations. We then study topological properties of the Pareto set. We show that it is neither connected nor closed in allocation space. Furthermore, if the public goods are local, the image of the Pareto set in utility space need not be closed or connected. We provide two independent sufficient conditions for the closedness of the Pareto set. The results are directly applicable to private goods economies with joint production. Our results should be of interest for general equilibrium and mechanism design theory; where for example, the properties of the efficient set are important for proving the existence of an equilibrium and for the study of the properties of monotone-path social choice correspondences.We thank Hideo Konishi, Tomoichi Shinotsuka, Nicholas Yannelis and an anonymous referee for valuable comments on previous drafts of this paper.     

The Evolutionary Stability of Moral Objections to Free Riding

In this study we explore the endogenous determination of moral objections to free riding. We first derive the individually rational behavior for given preferences. The motivational structure is allowed to evolve evolutionarily based on the comparison of the relative reproductive success of all possible preference types. The tastes that emerge are not necessarily those assumed in models resorting to altruism or moral obligations. In general, an effective social conscience preventing free riding need not be evolutionarily stable. In the first model that we explore, moral objections to free riding and, in turn, voluntary contributions to the provision of public goods are not to be expected with one notable exception, namely unanimity games. In the second model that we explore, the evolutionarily stable probability that an individual develops social conscience is positive.     

Rivalry, Exclusion, and Coalitions

This paper analyzes a model where groups can attain exclusive ownership of a resource by means of a contest. We show that more concave production technologies and more egalitarianism within groups induce higher levels of social conflict. We then study endogenous coalition formation. Under cooperative exploitation of the resource, the grand coalition is the efficient partition but there exists a strong tendency toward bipartisan conflicts. Under noncooperative exploitation, conflict can ex ante Pareto dominate peaceful access and it becomes more difficult to support the grand coalition as a stable structure.     

Crowdfunding and social influence: an empirical investigation

The literature so far provides no in-depth investigation of the determinants of decisions to contribute to crowdfunding platforms. The present article draws on work measuring the decisions and prosocial behaviours of individuals in relation to public goods, and uses survey data on crowdfunding behaviour. We surveyed an original sample of individuals in France to explore individual decisions and amounts of funding chosen to support a creative project. We show that in non-equity crowdfunding contributing money is associated with altruism. Our findings suggest that the ‘warm glow’ effect influences the level of the contribution; we show also those monetary incentives could ‘crowd out’ the decisions to contribute of crowdfunders. Our study has some implications for business strategy since understanding why people contribute adds to our knowledge about the incentives that might encourage them to increase their contributions, and allows predictions about how changes to how crowdfunding platforms are managed might affect individual incentives to give.     

Government versus Opposition: Who Should be Who in the 16th German Bundestag?

We model the process of coalition formation in the 16th German Bundestag as a hedonic coalition formation game. In order to induce players' preferences in the game we apply the Shapley value of the simple game describing all winning coalitions in the Bundestag. Using different stability notions for hedonic games we prove that the ``most' stable government is formed by the Union Parties together with the Social Democratic Party.     

Stable Coalition Structures with Externalities

This paper argues that the sign of external effects of coalition formation provides a useful organizing principle in examining economic coalitions. In many interesting economic games, coalition formation creates eithernegativeexternalities orpositiveexternalities for nonmembers. Examples of negative externalities are research coalitions and customs unions. Examples of positive externalities include output cartels and public goods coalitions. I characterize and compare stable coalition structures under the following three rules of coalition formation: the Open Membership game of Yi and Shin (1995), the Coalition Unanimity game of Bloch (1996), and the Equilibrium Binding Agreements of Ray and Vohra (1994).Journal of Economic LiteratureClassification Numbers: C72, C71.     

Matching soulmates

We study iterated matching of soulmates (IMS), a recursive process of forming coalitions that are mutually preferred by members to any other coalition containing individuals as yet unmatched by this process. If all players can be matched this way, preferences are IMS-complete. A mechanism is a soulmate mechanism if it allows the formation of all soulmate coalitions. Our model follows Banerjee, Konishi, and Sönmez, except reported preferences are strategic variables. We investigate the incentive and stability properties of soulmate mechanisms. In contrast to prior literature, we do not impose conditions that ensure IMS-completeness. A fundamental result is that, (1) any group of players who could change their reported preferences and mutually benefit does not contain any players who were matched as soulmates and reported their preferences truthfully. As corollaries, (2) for any IMS-complete profile, soulmate mechanisms have a truthful strong Nash equilibrium, and (3) as long as all players matched as soulmates report their preferences truthfully, there is no incentive for any to deviate. Moreover, (4) soulmate coalitions are invariant core coalitions—that is, any soulmate coalition will be a coalition in every outcome in the core. To accompany our theoretical results, we present real-world data analysis and simulations that highlight the prevalence of situations in which many, but not all, players can be matched as soulmates. In the Appendix we relate IMS to other well-known coalition formation processes.