Efficient provision of public goods with endogenous redistribution
AbstractWe study a continuous and balanced mechanism that is capable of implementing in Nash equilibrium all the Pareto-efficient individually rational allocations for an economy with public goods. The Government chooses a set of weights directly related to the Lindahl prices corresponding to the Pareto-efficient allocation it wants to implement. The mechanism then guarantees that initial endowments are re-allocated so that the chosen vector of Lindahl prices is indeed a Lindahl equilibrium, and implements the corresponding Lindahl allocation. Previously known mechanisms that implement the Lindahl correspondence do not allow the Government to choose which point on the Pareto frontier should be implemented, unless it can also redistribute initial endowments in the appropriate way. By contrast, in our case the Government directly controls the distribution of welfare in the economy. Finally, besides being balanced and continuous, our mechanism is `simple'. Each agent has to declare a desired increase in the amount of public good, and a vector of redistributive transfers of initial endowments (across other agents).
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Bibliographic InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 9912.
Date of creation: 01 Jan 1999
Date of revision:
Other versions of this item:
- Luca Anderlini & Paolo Siconolfi, 2004. "Efficient provision of public goods with endogenous redistribution," Review of Economic Design, Springer, Springer, vol. 8(4), pages 413-447, 04.
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