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A Case for Bundling Public Goods Contributions

Author

Listed:
  • SUMAN GHOSH
  • ALEXANDER KARAIVANOV
  • MANDAR OAK

Abstract

We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated toward the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis‐à‐vis a separate contributions scheme. We show that for high income inequality or for identical preferences among agents bundling leads to higher joint welfare. Interestingly, a welfare improvement can in some cases occur despite a decrease in total contributions. On the contrary, when agents are heterogenous, for low income inequality bundling can lead to lower total contributions and may decrease welfare compared to a separate contribution scheme. Our findings have implications for the design of charitable institutions and international aid agencies.

Suggested Citation

  • Suman Ghosh & Alexander Karaivanov & Mandar Oak, 2007. "A Case for Bundling Public Goods Contributions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 425-449, June.
    • Handle: RePEc:bla:jpbect:v:9:y:2007:i:3:p:425-449
    DOI: 10.1111/j.1467-9779.2007.00313.x
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    References listed on IDEAS

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    1. Dreze, Jean & Sen, Amartya, 1999. "India: Economic Development and Social Opportunity," OUP Catalogue, Oxford University Press, number 9780198295280.
    2. Hanming Fang & Peter Norman, 2003. "An Efficiency Rationale for Bundling of Public Goods," Cowles Foundation Discussion Papers 1441, Cowles Foundation for Research in Economics, Yale University.
    3. Richard Cornes & Juni-ichi Itaya, 2004. "Models With Two Or More Public Goods," Department of Economics - Working Papers Series 896, The University of Melbourne.
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    Cited by:

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    3. Kundu, Rajendra P. & Pandey, Siddhigyan, 2021. "Multiple Public Goods In Networks," Working Papers 21/345, National Institute of Public Finance and Policy.
    4. Tilak Sanyal, 2016. "Pareto Improving Redistribution in the Case of Private Provision of Multiple Pure Public Goods," South Asian Journal of Macroeconomics and Public Finance, , vol. 5(2), pages 220-230, December.
    5. Corazzini, Luca & Cotton, Christopher & Valbonesi, Paola, 2015. "Donor coordination in project funding: Evidence from a threshold public goods experiment," Journal of Public Economics, Elsevier, vol. 128(C), pages 16-29.
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    8. Jun-ichi Itaya & Atsue Mizushima, 2016. "Should Income Inequality be Praised? Multiple Public Goods Provision, Income Distribution and Social Welfare," CESifo Working Paper Series 6215, CESifo.
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