Bayesian Equilibrium in a Public Good Economy

This paper studies the provision of a public good via voluntary contributions in an economy with uncertainty and differential information. Consumers differ in their private information regarding their future endowment as well as in their preferences. Each consumer selects her consumption ex ante, i.e., before knowing the state of nature. Contributions to the provision of the public good are determined ex post, i.e., when the state of nature is realized. Assuming that some normality conditions hold, a Bayesian equilibrium exists. Further, equilibrium is unique, regardless of the number of consumers, when either (1) the information partitions of consumers can be ranked from the finest to the coarsest, or (2) there are only two types of consumers.     

The Time‐Consistent Public Goods Provision

In this study, we reconsider the optimal nonlinear tax problem with the public good from the perspective of the commitment issue and examine how it affects the condition of the public good provision. We show that the Samuelson rule should be modified when the government cannot commit and the skill types of taxpayers are revealed in the first period. This is true even if the preference of the taxpayers is separable and additive with respect to consumption and leisure. Our analysis also shows how the lack of commitment affects the formula of the marginal cost of public funds and the level of public good provision. Our findings imply that the level of the public good may be excessive in comparison to the case where the government can commit to its tax policy.     

Public Goods and Tax Competition in a Two‐Sided Market

A rather neglected issue in the tax competition literature is the dependence of equilibrium outcomes on the presence of firms and shoppers (two‐sided markets). Making use of a model of vertical and horizontal differentiation, within which jurisdictions compete by providing public goods and levying taxes in order to attract firms and shoppers, this paper characterizes the noncooperative equilibrium. It also evaluates the welfare implications for the jurisdictions of a popular policy of tax coordination: The imposition of a minimum tax. It is shown that the interaction of the two markets affects the intensity of tax competition and the degree of optimal vertical differentiation chosen by the competing jurisdictions. Though the noncooperative equilibrium is, as it is typically the case, inefficient such inefficiency is mitigated by the strength of the interaction in the two markets. A minimum tax policy is shown to be effective when the strength of the interaction is weak and ineffective when it is strong.     

On the Neutrality of Redistribution in a General Equilibrium Model with Public Goods

Models on private provision of public goods typically involve a single private good and linear production technology for the public good. We study a model with several private goods and nonlinear (strictly concave) production technology. We revisit the question of „neutrality” of government interventions on equilibrium outcomes and show that relative price effects that are absent with a single private good and linear production technology become a powerful channel of redistribution in this case. Contrary to previous results, redistributing endowments in favor of contributors is shown to be neither necessary nor sufficient for increasing the equilibrium level of public good.     

基于农户视角的农村公共品供需均衡研究

基于3省245个农户的调查表明,农民当前最急需的公共品是卫生医疗、农田基础设施;农民的公共品需求有如下特点：硬品优先于软品;物质需求优先于精神需求;现实优于长远;切身利益重于宏观环境。合意的公共品供给有新型农村合作医疗、粮食直补政策和义务教育,农民对公共品供给最不满意的是农村社会养老、农业科技信息服务和农村金融。农民对公共品供给的满意度主要取决于公共品的规模、质量、价格和农户的人口社会学背景。最后,对农村公共品供需均衡矩阵进行了分析,并建议根据公共品供需衔接状况、农民对公共品供给的满意程度,实行不同的公共品供给策略。     

Financial Control of a Competitive Economy with Public Goods but Without Randomness

The monetary and fiscal control of a simple economy without outside randomness is studied here from the microeconomic basis of a strategic market game. The government’s bureaucracy is treated as a public good that provides services at a cost. A conventional public good is also considered.     

Edgeworth and Lindahl–Foley equilibria of a General Equilibrium Model with Private Provision of Pure Public Goods

In this paper, we propose a definition of Edgeworth equilibrium for a private ownership production economy with (possibly infinitely) many private goods and a finite number of pure public goods. We show that Edgeworth equilibria exist whatever be the dimension of the private goods space and can be decentralized, in the finite and infinite dimensional cases, as Lindahl–Foley equilibria. Existence theorems for Lindahl–Foley equilibria are a by‐product of our results.     

Neighbors' Income,Public Goods,and Well‐Being

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being.     

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.     

Public Sector Pricing,Capital Mobility and National Income: A Two‐Sector General‐Equilibrium Analysis

Abstract This paper examines the resource allocation and income effects of public‐sector pricing. During the short run, raising public‐sector prices leads to a worsening in public‐sector efficiency, causing a decline in GNP. In the intermediate run, the policy begins to improve public‐sector efficiency and, hence, increases GNP. At the outset of the transition to a steady state, the pricing policy continues to improve efficiency. Nevertheless, efficiency and GNP remain invariant across steady states in the long‐run equilibrium. The implications of the pricing policy are also discussed.     

On the Cost of Opportunistic Behavior in the Public Sector: A General‐Equilibrium Approach

This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between opportunistic behavior of government bureaucrats and the public sector wage bill. In particular, public officials are modeled as individuals competing for a larger share of those public funds. A simple extraction technology in the government administration is introduced in a standard real‐business‐cycle setup augmented with detailed public sector. The model is calibrated to German data for the period 1970–2007. The main findings are: (i) the model performs well vis‐à‐vis the data; (ii) due to the existence of a significant public sector wage premium and the high public sector employment, a substantial amount of working time is spent in opportunistic activities, which, in turn, leads to significant losses in terms of output; and (iii) the model‐based loss measures obtained for the EU‐12 countries are highly correlated to indices of bureaucratic inefficiency.     

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.     

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.     

Trade Policy in Lobbying Equilibrium: With Non‐Traded and Traded Final Goods and Intermediate Inputs

The paper derives trade policies endogenously for final consumption and intermediate input industries in the presence of a non‐traded sector. Contrary to what the existing literature suggests, results show that there is no definite relation between lobbying status and the direction of trade policy of an industry. Trade protection of an industry depends on how its consumption (horizontal) and production (vertical) linkages with other industries reinforce or cancel out its lobbying efforts. To cite a few results, (i) an organized industry may face trade tax, whereas an unorganized one may obtain protection; (ii) an organized downstream industry may not be able to impose trade tax to an unorganized upstream industry, (iii) an organized upstream industry may not hurt unorganized downstream industry, (iv) lobby for non‐traded industry alone can influence trade policies, and (v) lobby for traded industry affects the size of the non‐traded sector in the economy.     

A Case for Bundling Public Goods Contributions

We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated toward the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis‐à‐vis a separate contributions scheme. We show that for high income inequality or for identical preferences among agents bundling leads to higher joint welfare. Interestingly, a welfare improvement can in some cases occur despite a decrease in total contributions. On the contrary, when agents are heterogenous, for low income inequality bundling can lead to lower total contributions and may decrease welfare compared to a separate contribution scheme. Our findings have implications for the design of charitable institutions and international aid agencies.     

Linear Public Goods Experiments: A Meta-Analysis

Objective: To use meta-analysis techniques to assess the impact of various factors on the extent of cooperation in standard linear public goods experiments using the voluntary contributions mechanism. Data Sources: Potentially relevant experiments were identified through searches of EconLit, the Internet Documents in Economics Access Service (IDEAS), and a survey article. Review Methods: A total of 349 potentially relevant studies were identified. Of these, 27 (representing a total of 711 groups of participants) met the inclusion criteria. Data were abstracted from these studies using a standardized protocol. Results were analyzed using weighted ordinary least squares. Average group efficiency was the dependent variable. Results: The marginal per capita return, communication, constant group composition over the session (partners), positive framing, and the use of children as subjects had a positive and significant effect (p < 0.05) on the average level of contribution to the public good. Heterogeneous endowments to subjects, experienced participants, and soliciting subjects' beliefs regarding other participants' behaviour prior to the start of the session/period had a negative and significant effect. A number of other factors were not identified as significant. Conclusion: The meta-analysis results parallel several key findings from previous literature reviews. In addition, they offer parameter estimates and an analysis of significance based on the totality of the available research evidence. More consistent reporting of the results of experiments would greatly improve the ability to conduct this type of research.     

Public Provision of Private Goods,Self‐Selection,and Income Tax Avoidance

Redistributive taxation should benefit those with low earnings capacity rather than those who choose a lower income to obtain tax savings. Several contributions have highlighted how public provision of work complements can discourage people from lowering labor supply to diminish taxable income. We show how tax avoidance, previously neglected, can alter the conclusions regarding public provision. Tax avoidance breaks the link between labor supply and reported income. An agent reducing his reported income to escape taxes might no longer forego a publicly provided labor complement, because he can now lower his income by avoiding more rather than working less.     

Publicly Provided Private Goods and Redistribution: A General Equilibrium Analysis

Public provision of private goods is examined within a self-selection framework where production depends on labour supply of different households and the level of public provision. It is shown that productivity and wage-structure effects can create a role for public provision, even if preferences are weakly separable between goods and leisure. Public provision of education may offer an intuitively appealing case for the production-side impacts. We also address the reasons for public provision in a dynamic, overlapping generations economy, whereby public provision may affect efficiency and social costs of redistribution of future generations as well.
JEL classification : H 23; H 42     

A Two-stage Price-setting Equilibrium Designed in Consideration of Goods Relevance and Strategic Relevance

This paper analyses the subgame perfect Nash equilibrium of a two-stage price-setting duopoly. The demand functions are classified into four cases in terms of the goods' relevance and strategic relevance between two firms. All four cases are correlated with two opposite prior commitments that generate kinks in the reaction curve. This paper assumes that only one firm can execute the prior commitments. In the model, we find that the firm can increase its payoff with one of the prior commitments in each of the four cases. We also find that our equilibrium outcomes are different from those of Matsumura (1998) in this Journal, and that they occur at the Stackelberg point in all four cases if, and only if, the firm's reaction curves shift to the Stackelberg point as a result of the prior commitments. As a consequence, the effectiveness of strategic commitments is proved.