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Government Subsidies to Private Spending on Public Goods

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  • Roberts, Russell D

Abstract

This paper examines how the size of an efficient subsidy varies with the amount of freeriding and the presence of distorting taxation. Ironically, the existence of free-riding, where some individuals make no voluntary contribution at all, reduces the size of an efficient subsidy and makes a subsidy more attractive compared to direct taxation. For the gain to be significant, the number of donors must be extremely few in number. Even when the gains from a subsidy relative to direct taxation are small, a subsidy may dominate direct taxation because it can reveal an efficient level of the public good. The analysis distinguishes between traditional public goods such as national defense, and what the author calls transfer public goods, where members of society care about the consumption of a particular group in society such as the poor. He generalizes the Samuelson (1954) results to derive conditions for efficiency in providing transfer public goods. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Roberts, Russell D, 1992. "Government Subsidies to Private Spending on Public Goods," Public Choice, Springer, vol. 74(2), pages 133-152, September.
    • Handle: RePEc:kap:pubcho:v:74:y:1992:i:2:p:133-52
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    Cited by:

    1. Christiane Reif & Dirk Rübbelke & Andreas Löschel, 2017. "Improving Voluntary Public Good Provision Through a Non-governmental, Endogenous Matching Mechanism: Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 559-589, July.
    2. Kirchsteiger, Georg & Puppe, Clemens, 1997. "On the possibility of efficient private provision of public goods through government subsidies," Journal of Public Economics, Elsevier, vol. 66(3), pages 489-504, December.
    3. Jun‐ichi Itaya & A.G. Schweinberger, 2006. "The public and private provision of pure public goods and the distortionary effects of income taxation: a political economy approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 1023-1040, August.
    4. Hikaru Ogawa, 2010. "Fiscal Competition among Regional Governments - Tax Competition, Expenditure Competition and Externalities -," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(1), pages 1-30, February.
    5. Mari Rege, 1999. "Social Norms and Private Provision of Public Goods: Endogenous Peer Groups," Discussion Papers 257, Statistics Norway, Research Department.
    6. Falkinger, Josef, 1996. "Efficient private provision of public goods by rewarding deviations from average," Journal of Public Economics, Elsevier, vol. 62(3), pages 413-422, November.
    7. Quiroz Flores, Alejandro & Pfaff, Katharina, 2021. "Private provision of public goods and political survival: Rail transport in four European democracies in the 20th century," Research in Transportation Economics, Elsevier, vol. 90(C).
    8. Josef Falkinger, 2004. "Noncooperative Support of Public Norm Enforcement in Large Societies," CESifo Working Paper Series 1368, CESifo.
    9. Toshikazu Ohsawa & Tong Yang, 2022. "Productive effects of public spending, spillovers, and optimal matching grant rates," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-8, December.
    10. Hongyun Han & Zhijian Zhang & Sheng Xia, 2016. "The Crowding-Out Effects of Garbage Fees and Voluntary Source Separation Programs on Waste Reduction: Evidence from China," Sustainability, MDPI, vol. 8(7), pages 1-17, July.
    11. Josef Falkinger, 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March.
    12. Vitalik Buterin & Zoë Hitzig & E. Glen Weyl, 2019. "A Flexible Design for Funding Public Goods," Management Science, INFORMS, vol. 65(11), pages 5171-5187, November.
    13. Ratna K Shrestha & Kwang Soo Cheung, 2001. "All That Glows Is Not Warm Glow: Private Contributions and Social Recognition," Working Papers 200101, University of Hawaii at Manoa, Department of Economics.
    14. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 639-645, August.
    15. Mari Rege, 2004. "Social Norms and Private Provision of Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(1), pages 65-77, February.

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