Taxation in an economy with private provision of public goods

This paper analyses the effects of taxation and subsidies in an economy with private provision of a public good. It is shown that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others. We then consider linear nonneutral tax-subsidy schemes and analyse efficiency and uniqueness of the resulting Nash equilibria. We show that an efficient Nash equilibrium, where all individuals contribute, will in general not be unique, and establish a non-uniformity property which a tax-subsidy scheme must fulfil in order to induce a unique interior equilibrium that is efficient. Throughout the paper it is assumed that individuals fully understand and take into account the government's budget constraint. Received: 3 November 1997 / Accepted: 23 March 1999     

Efficient provision of public goods with endogenous redistribution

We study a balanced mechanism that is capable of implementing in Nash equilibrium all the Pareto-efficient individually rational allocations for an economy with public goods. The Government chooses a set of weights directly related to the Lindahl prices corresponding to the Pareto-efficient allocation to be implemented. The mechanism then guarantees that initial endowments are re-allocated so that the chosen vector of Lindahl prices is indeed a Lindahl equilibrium, and implements the corresponding Lindahl allocation. Finally, besides being balanced, our mechanism is simple. Each agent has to declare a desired increase in the amount of public good, and a vector of redistributive transfers of initial endowments (across other agents).Received: 9 May 2003, Accepted: 22 October 2003, JEL Classification: C79, H21, H30, H41We wish to thank Jeremy Edwards, Andrew Postlewaite and Emanuela Sciubba for helpful comments. Of course, any remaining errors are our own.     

Pareto improving interventions in a general equilibrium model with private provision of public goods

Most of the literature on government intervention in models of voluntary public goods supply focuses on interventions that increase the total level of a public good, which is considered to be typically underprovided. However, an intervention that is successful in increasing the public good level need not benefit everyone. In this paper we take a direct approach to welfare properties of voluntary provision equilibria in a full blown general equilibrium model with public goods and study interventions that have the goal of Pareto improving on the voluntary provision outcome. Towards this end, we study a model with many private goods and non-linear production technology for the public good, and hence allow for relative price effects to serve as a powerful channel of intervention. In this setup we show that Pareto improving interventions generally do exist. In particular, direct government provision financed by “small” , or “local” , lump-sum taxes can be used generically to Pareto improve upon the voluntary provision outcome.     

The effect of spillovers on the provision of local public goods

This paper analyzes the provision of local public goods with positive spillovers across jurisdictions. If spillovers are symmetric, the non-cooperative game played by jurisdictions admits a unique equilibrium, and an increase in spillovers reduces the total provision of public goods. Smaller jurisdictions always reduce their contribution, but larger jurisdictions can increase their contribution. When spillovers are asymmetric, equilibrium is unique if spillovers are low, while multiple equilibria exist for high spillover values. In the case of two jurisdictions, an increase in the flow of spillovers to one jurisdiction benefits agents from that jurisdiction but harms agents in the other jurisdiction. Beyond the case of two jurisdictions, the effect of changes in spillovers cannot be signed. An increase in the spillovers flowing to a jurisdiction can actually result in an increase in the supply of public goods by that jurisdiction and harm agents residing in it, while benefiting agents in the other jurisdictions. The results of the paper reveal the complexity of interactions that will plague the design of institutions for multijurisdictional local public good economies with spillovers.      

Safety regulation and monitor liability

We propose a simple liability rule when several agents are jointly responsible for monitoring a risky economic activity or certifying its security. Examples are safety controls for drugs or technical systems, environmental liability, or air safety accidents. The agents have private knowledge of their monitoring or avoidance costs. We adopt a mechanism design approach to ensure optimal monitoring incentives. Our innovation is to focus on information that is available or can be proxied when harm has occurred and when typically regulators and/or courts deliberate over fines and damages. By contrast, earlier proposals require more estimations of hypothetical accident scenarios and their ex ante probabilities. We argue that our rule promises substantial savings in information costs for courts and regulators and excludes likely sources of errors. Received: 11 October 2000 / Accepted: 14 September 2001 We are grateful to Doug Bernheim, Lewis Kornhauser, Kai-Uwe Kühn and an anonymous referee for helpful comments and discussions, and to an associate editor in particular for very valuable suggestions. Financial support from the European Commission (TMR Grant ERBFMBICT 972827) and from Thyssen Foundation is gratefully acknowledged.     

Altruism, redistribution and social insurance

The paper examines the influence of altruism on voluntary transfers and government redistribution in a simple model: two jobs of different productivity are assigned by chance to two individuals. Ex ante the individuals are identical, ex post they have different incomes. The first part of the paper examines voluntary transfers determined ex post or agreed upon ex ante in the absence of altruism. In the second part, the influence of altruism is examined. Altruism is modelled as a pure public good: the minimum consumption (or income, since there is only one consumption good). Both individuals can contribute to its provision, one person by earning wage income, the other by voluntary transfers. The ex ante solutions generally lead to higher expected welfare but create several incentive problems. Only lump-sum transfers are considered. Received: 28 February 1997 / Accepted: 31 January 2000     

Sources of inefficiency in representative democracy: Evidence on public investments across nations

Besley and Coate (1997 and 1998) exposit a formal model of dynamic fiscal policy that highlights the problem associated with the temporal mismatch between the incidence of benefits and costs. Their analysis focuses in part on the conditions that may result in inefficient public investment decisions in a representative democracy. This paper employs cross-national data to investigate implications of the Besley-Coate model. The findings indicate that several political institutions significantly affect public investments, including term lengths, staggered term expiration dates, and the separation of power between the executive and legislative branches. The findings also suggest that fiscal arrangements for redistributive payments may increase public investments. Received: March 2000 / Accepted: May 2000     

Voice,exit and local capture in public provision of private goods

We developed a simple model on publicly provided private goods, such as health or education that highlights a vicious cycle faced by many developing countries. When public services are not of high quality due to mismanagement or corruption, the wealthy may switch to private alternatives. Their exit weakens the influence of citizen voice over politicians, since that leaves the poor as the only constituent with a stake in good governance. As the civic control over local governments weakens, government’s concern for social welfare declines even further, leading to more corruption and more corrosion in the quality of public services. Our model shows that establishing institutions (such as local taxation) that spread the costs and benefits of governance across the whole society is crucial for the success of local governments. Empirical results from the Philippines support this hypothesis.     

Effects of an anticipated expansion in international public goods on public capital accumulation

This paper presents a generic model to include public capital accumulation and the services of international public goods provided by a neighbor country. It examines the long-run and short-run responses of private and public capital accumulation in the home country to an anticipated increase in international public goods. It is found that the home economy in effect cuts its public capital stock, but keeps an unchanged private capital stock in the long run when a neighbor commits itself to expanding the stock of public goods in the future. The key factor determining the short-run responses of the home country is the extent to which it will match its government spending with a neighbor country's policy, which is associated with the relative difference between the marginal utility of consumption and that of home public capital affected by an increase in international public goods.     

城市公共品供给中各级政府事权与财权的划分

政府在城市公共品供给中需要考虑如何合理划分各级政府的事权与财权.城市公共品的特性是各级政府事权划分的基础,而事权与财权相统一的原则是各级政府财权划分的理论依据.通过对我国城市公共品供给中各级政府间财政关系进行实证研究发现,各级政府在事权划分上存在模糊、重复、越位和缺位的情况,而财权的划分则没有能够实现与相应事权的匹配.因此,需要重新界定各级政府的事权与财权,从而完善政府的城市公共品供给职能.     

Buyers' and sellers' cartels on markets with indivisible goods

This paper analyzes the formation of cartels of buyers and sellers in a simple model of trade inspired by Rubinstein and Wolinsky's (1990) bargaining model. When cartels are formed only on one side of the market, there is at most one stable cartel size. When cartels are formed sequentially on the two sides of the market, there is also at most one stable cartel configuration. Under bilateral collusion, buyers and sellers form cartels of equal sizes, and the cartels formed are smaller than under unilateral collusion. Both the buyers' and sellers' cartels choose to exclude only one trader from the market. This result suggests that there are limits to bilateral collusion, and that the threat of collusion on one side of the market does not lead to increased collusion on the other side.     

On durable goods monopolies and the Coase-Conjecture

Consider the durable goods monopoly game with uniformly distributed consumers' valuations. To establish the Coase-Conjecture in this context takes an infinite time horizon and a negligible delay between market rounds. An infinite time horizon or patience of market participants alone are not sufficient for the Coase-Conjecture, nor is an arbitrarily small delay between price offers within a finite time horizon. Received: 20 March 1996 / Accepted: 15 December 1997     

区域经济合作推动公共产品供给的机理及对策

市场经济存在着市场失灵,因此需要政府提供公共产品,同时,由于存在着区域间发展不均衡和地方利益保护,公共产品的供给也存在着严重的不均衡,反过来限制了区域经济一体化的发展和进程。文章研究根据区域经济一体化理论,提出了构建区域经济一体化推动的横向公共产品供给模式,以此更好地推动区域经济合作的思路。     

Natural and double implementation of public ownership solutions in differentiable production economies

This paper examines the implementation of two public ownership solutions in convex production economies with differentiable production functions. The two public ownership solutions we focus on are the proportional and equal benefit solutions. Two “natural” mechanisms which doubly implement the proportional and equal benefit solutions respectively in Nash and strong Nash equilibria are proposed without assuming free disposal. Received: 7 May 1996 / Accepted: 1 December 1998     

A characterization of the existenceof optimal dominant strategy mechanisms

This paper provides two theorems which characterize the domains of valuation functions for which there exist Pareto efficient and truth dominant strategy mechanisms (balanced Groves mechanisms). Theorem 1 characterizes the existence of balanced Groves mechanisms for a general class of valuation functions. Theorem 2 provides new balance-permitting domains of valuation functions by reducing the problem of solving partial differential equations to the problem of solving a polynomial function. It shows that a balanced Groves mechanism exists if and only if each valuation function in the family under consideration can be obtained by solving a polynomial function with order less than , where n is the number of individuals. Received: 5 January 1997 / Accepted: 25 May 1999     

Voluntary contributions to multiple public goods in a production economy with widespread externalities

In a production economy, multiple public goods are produced by firms in competitive markets, and provided by the government together with contributions from consumers. There are widespread externalities: all consumers’ consumption and contributions and all firms’ production enter into utility functions. Public goods can be imperfect substitutes or complements, and they can be local public goods or club goods. Zero bounds that require consumers to make nonnegative contributions complicate the differentiable approach. Applying the transversality theorem for smooth economies in a regular parameterization, we obtain the existence of equilibrium in such an economy, and generically equilibria are regular and locally unique.     

Differentiable strategy-proof mechanisms for private and public goods in domains that are not necessarily large or quasi-linear

In this paper, we develop a differentiable approach to deal with incentives in a, possibly small, subset of a general domain of preferences in economies with one public and one private good. We show that, for two agents, there is no mechanism which is efficient, strategy-proof and where consumption of both goods is positive for all agents. For the case of two or more agents the same result occurs when nondictatorship is replaced by Individual Rationality. We are very grateful to Atila Abdulkadiroglu, Carmen Beviá, Xavier Calsamiglia, Marco Celentani, Bernardo Moreno, Antonio Romero-Medina, William Thomson, Walter Trockel, an associate editor, three anonymous referees and participants at seminars at Universities of Alicante, Autónoma de Barcelona and Rochester and the Spanish Economic Association meeting in Sevilla for very helpful comments and suggestions.     

Full pooling in multi-period contracting with adverse selection and noncommitment

This paper analyses multi-period regulation or procurement policies under asymmetric information between the regulator and regulated firms. As well known in the literature, some degree of separation is always optimal under any form of commitment. In contrast, we show that full pooling is optimal under noncommitment when the discount factor is sufficiently high. We also discuss the meaning of full pooling under double randomization. Finally, we provide a graphical analysis of the second-best policy in terms of the regulator's commitment capacity. Received: 4 December 1996 / 7 October 1999     

The graph of Lindahl correspondence as the unique von Neumann-Morgenstern abstract stable set

In this paper, we consider a continuum economy with a finite number of types of agent, and several private and public goods. The main result of the paper is that the graph of the equal-treatment Lindahl equilibria mapping is the unique abstract stable set with respect to the dominance relation in economies with crowding effects introduced by Vasil'ev et al. in 1995. The external stability of this mapping implies that, for any equal-treatment allocation x in , that is not a Lindahl equilibrium, there exists a subeconomy of such that one of its equal-treatment Lindahl allocations blocks x. This result is a counterpart of the theorem of Mas-Colell for Aumann's atomless market with private goods.