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Why And How Should The Government Finance Public Goods In Rural Areas? A Review Of Arguments

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  • Petrick, Martin

Abstract

This paper reviews three arguments why government should not directly finance public goods provision in the countryside: (1) sorting and voting of residents leads to efficient local public goods provision, (2) community governance may better cope with incomplete contracting in public goods, and (3) public provision drives out voluntary private provision of public goods. Theory and empirical evidence partly support these arguments. The adequate level of rural governance appears to be often below the European or national level, and policy should focus on the institutional premises of public goods provision rather than on centralized payments to public good providers.

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Paper provided by German Association of Agricultural Economists (GEWISOLA) in its series 46th Annual Conference, Giessen, Germany, October 4-6, 2006 with number 14961.

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Date of creation: 2006
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Handle: RePEc:ags:gewi06:14961

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Keywords: Rural areas; public goods; institutions; agricultural policy reform; Public Economics;

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  1. Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060 Elsevier.
  2. Eggers, Jorg & Laschewski, Lutz & Schleyer, Christian, 2004. "Agri-Environmental Policy in Germany: Understanding the Role of Regional Administration," Institutional Change in Agriculture and Natural Resources Discussion Papers 18832, Humboldt University Berlin, Department of Agricultural Economics.
  3. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  4. Payne, A. Abigail, 1998. "Does the government crowd-out private donations? New evidence from a sample of non-profit firms," Journal of Public Economics, Elsevier, vol. 69(3), pages 323-345, September.
  5. Diamond, Peter, 2006. "Optimal tax treatment of private contributions for public goods with and without warm glow preferences," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 897-919, May.
  6. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
  7. Baland, Jean-Marie & Platteau, Jean-Philippe, 2000. "Halting Degradation of Natural Resources: Is There a Role for Rural Communities?," OUP Catalogue, Oxford University Press, number 9780198290612, October.
  8. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, vol. 93(3), pages 792-812, June.
  9. Paul W. Rhode & Koleman S. Strumpf, 2003. "Assessing the Importance of Tiebout Sorting: Local Heterogeneity from 1850 to 1990," American Economic Review, American Economic Association, vol. 93(5), pages 1648-1677, December.
  10. Robert D. Weaver, 1996. "Prosocial Behavior: Private Contributions to Agriculture's Impact on the Environment," Land Economics, University of Wisconsin Press, vol. 72(2), pages 231-247.
  11. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185.
  12. Theesfeld, Insa, 2004. "Constraints on Collective Action in a Transitional Economy: The Case of Bulgaria's Irrigation Sector," World Development, Elsevier, vol. 32(2), pages 251-271, February.
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