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Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets

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  • Matthew J. Kotchen

Abstract

This article examines voluntary provision of a public good that is motivated, in part, to compensate for activities that diminish the public good. Markets for environmental offsets, such as those that promote carbon neutrality, provide an increasingly salient example. An important result is that mean donations do not converge to zero as the economy grows large. The equilibrium is solved to show how direct donations and net contributions depend on wealth and heterogeneous preferences. Comparative static analysis demonstrates how public good provision and social welfare depend on the technology, individual wealth and an initial level of the public good. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

Suggested Citation

  • Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, April.
  • Handle: RePEc:ecj:econjl:v:119:y:2009:i:537:p:883-899
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    References listed on IDEAS

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    1. Matthew Kotchen & Michael Moore, 2008. "Conservation: From Voluntary Restraint to a Voluntary Price Premium," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 195-215, June.
    2. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
    3. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
    4. Kotchen, Matthew J., 2005. "Impure public goods and the comparative statics of environmentally friendly consumption," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 281-300, March.
    5. Cornes, Richard & Sandler, Todd, 1994. "The comparative static properties of the impure public good model," Journal of Public Economics, Elsevier, vol. 54(3), pages 403-421, July.
    6. Hollander, Heinz, 1990. "A Social Exchange Approach to Voluntary Cooperation," American Economic Review, American Economic Association, vol. 80(5), pages 1157-1167, December.
    7. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    8. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    9. Cornes, Richard & Sandler, Todd, 1984. "Easy Riders, Joint Production, and Public Goods," Economic Journal, Royal Economic Society, vol. 94(375), pages 580-598, September.
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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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