Democratic Provision of Divisible Public Goods
AbstractIn this paper we examine the potential of democratic constitutions for the provision of divisible public goods in a large economy. Our main insights are as follows: When aggregate shocks are absent, the combination of the following rules yields first-best allocations: a supermajority rule, equal taxation, exemption of the agenda setter from taxation, and a ban on subsidies. In the presence of aggregate shocks to benefits or to costs of public-good provision, tax-sensitive majority rules, where the size of the required majority depends on the aggregate tax revenues, yield first-best allocations if a monotonicity condition is met. Finally, we explore the potential of first-best constitutions to induce voluntary participation by compensating agents belonging to the minority.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2939.
Date of creation: 2010
Date of revision:
democratic constitutions; tax-sensitive majority rules; constitutional rules; provision of public goods;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H40 - Public Economics - - Publicly Provided Goods - - - General
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