Dual Provision of Public Policies in Democracy
AbstractThis paper analyzes the provision of goods with consumption externalities (such as public policies) in hybrid settings: the `good' is provided in a democratic process by majority vote, but each individual agent is free to contribute additional amounts before or after the political decision has been made. Prominent examples include policy making in federal states, charities, and dual provision of health care. We show that regardless of the timing of private and public actions, the results of the median voter theorem apply. A move from a purely public system to a dual system with private ex-ante contributions is shown to be unambiguously preferred by everybody in society. In contrast, establishing an ex-post contribution regime may be opposed by a minority of high-preference individuals. The paper also derives results for a scenario with endogenous timing of private contributions. Most importantly, this general regime is shown to be majority preferred not only to the systems with ex-post and the ex-ante contributions, but also to an institutional setting with private but no public provision.
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Bibliographic InfoPaper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp07-20.
Date of creation: Oct 2007
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Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H40 - Public Economics - - Publicly Provided Goods - - - General
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-01 (All new papers)
- NEP-CDM-2007-12-01 (Collective Decision-Making)
- NEP-PBE-2007-12-01 (Public Economics)
- NEP-POL-2007-12-01 (Positive Political Economics)
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