Democratic Provision of Divisible Public Goods
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.
|Date of creation:||2010|
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4554123, Harvard University Department of Economics.
- Bård Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1535-1568.
- Hans Gersbach, 2009. "Democratic Mechanisms," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1436-1469, December.
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