The Limit of Public Policy: Endogenous Preferences
AbstractIn designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy.Public policy may also affect the formation of preferences and norms in a society.The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior.In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-71.
Date of creation: 2000
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Other versions of this item:
- Bar-Gill, O. & Fershtman, C., 2001. "The Limit of Public Policy: Endogenous Preferences," Papers 2001-5, Tel Aviv.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- P5 - Economic Systems - - Comparative Economic Systems
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