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Democratic Provision of Divisible Public Goods

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  • Hans Gersbach

Abstract

In this paper we examine the potential of democratic constitutions for the provision of divisible public goods in a large economy. Our main insights are as follows: When aggregate shocks are absent, the combination of the following rules yields first-best allocations: a supermajority rule, equal taxation, exemption of the agenda setter from taxation, and a ban on subsidies. In the presence of aggregate shocks to benefits or to costs of public-good provision, tax-sensitive majority rules, where the size of the required majority depends on the aggregate tax revenues, yield first-best allocations if a monotonicity condition is met. Finally, we explore the potential of first-best constitutions to induce voluntary participation by compensating agents belonging to the minority.

Suggested Citation

  • Hans Gersbach, 2010. "Democratic Provision of Divisible Public Goods," CESifo Working Paper Series 2939, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2939
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp2939.pdf
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    References listed on IDEAS

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    1. Philippe Aghion & Patrick Bolton, 2003. "Incomplete Social Contracts," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 38-67, March.
    2. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2004. "Endogenous Political Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 565-611.
    3. Hellwig, Martin F., 2005. "A utilitarian approach to the provision and pricing of excludable public goods," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 1981-2003, December.
    4. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 589-614.
    5. Hans Gersbach, 2009. "Democratic Mechanisms," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1436-1469, December.
    6. Bård Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1535-1568.
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    Cited by:

    1. Gersbach, Hans, 2017. "Flexible Majority Rules in democracyville: A guided tour," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 37-43.

    More about this item

    Keywords

    democratic constitutions; tax-sensitive majority rules; constitutional rules; provision of public goods;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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