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Public Policy with Endogenous Preferences

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  • OREN BAR-GILL
  • CHAIM FERSHTMAN

Abstract

Public policy may influence norms and preferences. By altering the payoffs associated with different preferences, public policy may influence the distribution of these preferences in the population. Such interdependence between policy and preferences may limit (or enhance) the effectiveness of different policies. We demonstrate this idea with a simple model of subsidizing contributions to a public good. While the short-run effect of such a subsidy will be an increase in the overall contribution, the subsidy triggers an endogenous preference change that results in a lower level of contribution to the public good, despite the explicit monetary incentives to raise that level. Copyright 2005 Blackwell Publishing Inc..

Suggested Citation

  • Oren Bar-Gill & Chaim Fershtman, 2005. "Public Policy with Endogenous Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 841-857, December.
  • Handle: RePEc:bla:jpbect:v:7:y:2005:i:5:p:841-857
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2005.00248.x
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    References listed on IDEAS

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    1. Sunstein, Cass R., 1999. "Free Markets and Social Justice," OUP Catalogue, Oxford University Press, number 9780195102734.
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    Cited by:

    1. Bonatti, Luigi, 2008. "Cultural relativism and ideological policy makers in a general equilibrium model with for-profit and non-profit enterprises," Research in Economics, Elsevier, vol. 62(1), pages 1-15, March.
    2. Adriani, Fabrizio & Sonderegger, Silvia, 2015. "Trust, trustworthiness and the consensus effect: An evolutionary approach," European Economic Review, Elsevier, vol. 77(C), pages 102-116.
    3. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    4. Samuel Bowles & Sung-Ha Hwang, 2014. "Optimal Incentives with State-Dependent Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(5), pages 681-705, October.
    5. Fali Huang, 2007. "Building Social Trust: A Human-Capital Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 552-573, December.
    6. Lucie Bottega & Jenny De Freitas, 2009. "Public, Private and Nonprofit Regulation for Environmental Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 105-123, March.
    7. van der Weele Joël, 2012. "Beyond the State of Nature: Introducing Social Interactions in the Economic Model of Crime," Review of Law & Economics, De Gruyter, vol. 8(2), pages 401-432, October.
    8. Vilen Lipatov, 2014. "Compliance Dynamics Generated by Social Interaction Rules," CESifo Working Paper Series 4767, CESifo Group Munich.

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