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Government Subsidies to Private Spending on Public Goods

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  • Roberts, Russell D
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    Abstract

    This paper examines how the size of an efficient subsidy varies with the amount of freeriding and the presence of distorting taxation. Ironically, the existence of free-riding, where some individuals make no voluntary contribution at all, reduces the size of an efficient subsidy and makes a subsidy more attractive compared to direct taxation. For the gain to be significant, the number of donors must be extremely few in number. Even when the gains from a subsidy relative to direct taxation are small, a subsidy may dominate direct taxation because it can reveal an efficient level of the public good. The analysis distinguishes between traditional public goods such as national defense, and what the author calls transfer public goods, where members of society care about the consumption of a particular group in society such as the poor. He generalizes the Samuelson (1954) results to derive conditions for efficiency in providing transfer public goods. Copyright 1992 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Public Choice.

    Volume (Year): 74 (1992)
    Issue (Month): 2 (September)
    Pages: 133-52

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    Handle: RePEc:kap:pubcho:v:74:y:1992:i:2:p:133-52

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    Web page: http://www.springerlink.com/link.asp?id=100332

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    Cited by:
    1. Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers 003, Institute for Empirical Research in Economics - University of Zurich.
    2. Georg Kirchsteiger & Clemens Puppe, 1997. "On the possibility of efficient private provision of public goods through government subsidies," ULB Institutional Repository 2013/5913, ULB -- Universite Libre de Bruxelles.
    3. Falkinger, Josef, 1996. "Efficient private provision of public goods by rewarding deviations from average," Journal of Public Economics, Elsevier, vol. 62(3), pages 413-422, November.
    4. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7), pages 639-645.
    5. Mari Rege, 1999. "Social Norms and Private Provision of Public Goods: Endogenous Peer Groups," Discussion Papers 257, Research Department of Statistics Norway.
    6. Josef Falkinger, 2004. "Noncooperative Support of Public Norm Enforcement in Large Societies," CESifo Working Paper Series 1368, CESifo Group Munich.
    7. Ratna K Shrestha & Kwang Soo Cheung, 2001. "All That Glows Is Not Warm Glow: Private Contributions and Social Recognition," Working Papers 200101, University of Hawaii at Manoa, Department of Economics.

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