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.