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Private Provision of Public Goods: Neutrality and Wealth-Dependent Preferences

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  • Oskar Nupia

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Abstract

Several authors have investigated the bounds of the so-called neutrality theorem where public goods are privately provided. Following this line of analysis, I investigate further in this paper the bounds of this result. I concentrate on an unexplored case in the existing literature- namely that where individual preferences for a public good are affected by respective levels of individual wealth. I prove that under such circumstances, the neutrality theorem no longer holds. More appealing, I discuss the conditions under which a redistribution of wealth might improve efficiency in the aggregate provision of public goods. Interestingly, we find that a redistribution of wealth from individuals who have a low valuation for public goods to those who have a high valuation for public goods does not necessarily increase its aggregate provision.

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File URL: http://economia.uniandes.edu.co/publicaciones/dcede2012-15.pdf
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Bibliographic Info

Paper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 009801.

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Length: 24
Date of creation: 02 Jul 2012
Date of revision:
Handle: RePEc:col:000089:009801

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Keywords: Public goods; private provision; neutrality theorem; income distribution;

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