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Improving Public Good Supply and Income Equality: Facing a Trade-Off

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  • Wolfgang Buchholz
  • Dirk Rübbelke

Abstract

It is explored in this paper how – depending on the agents’ preferences – an unequal income distribution may lead to a higher public good supply in a non-cooperative Nash equilibrium than in a cooperative Lindahl equilibrium that arises from a balanced income distribution. The degree of inequality that is needed for producing this result may be moderate what in particular is shown through an example with CES preferences.

Suggested Citation

  • Wolfgang Buchholz & Dirk Rübbelke, 2020. "Improving Public Good Supply and Income Equality: Facing a Trade-Off," CESifo Working Paper Series 8786, CESifo.
    • Handle: RePEc:ces:ceswps:_8786
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp8786.pdf
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    References listed on IDEAS

    as
    1. Wolfgang Buchholz & Dirk Rübbelke, 2018. "Progressivity of burden-sharing in a Lindahl Equilibrium: a unifying criterion," Economics Bulletin, AccessEcon, vol. 38(4), pages 1978-1985.
    2. Finus, Michael & McGinty, Matthew, 2019. "The anti-paradox of cooperation: Diversity may pay!," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 541-559.
    3. Michael Finus & Alejandro Caparrós (ed.), 2015. "Game Theory and International Environmental Cooperation," Books, Edward Elgar Publishing, number 15345.
    4. Wolfgang Buchholz & Wolfgang Peters, 2001. "The overprovision anomaly of private public good supply," Journal of Economics, Springer, vol. 74(1), pages 63-78, February.
    5. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185.
    6. Buchholz, Wolfgang & Konrad, Kai A., 1995. "Strategic transfers and private provision of public goods," Journal of Public Economics, Elsevier, vol. 57(3), pages 489-505, July.
    7. Danziger, Leif, 1976. "A graphic representation of the Nash and Lindahl equilibria in an economy with a public good," Journal of Public Economics, Elsevier, vol. 6(3), pages 295-307, October.
    8. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
    9. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    10. Ythier, Jean Mercier, 1998. "The distribution of wealth in the liberal social contract," European Economic Review, Elsevier, vol. 42(2), pages 329-347, February.
    11. Richard Cornes & Todd Sandler, 2000. "Pareto‐Improving Redistribution and Pure Public Goods," German Economic Review, Verein für Socialpolitik, vol. 1(2), pages 169-186, May.
    12. Barrett, Scott, 1990. "The Problem of Global Environmental Protection," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 6(1), pages 68-79, Spring.
    13. Itaya, Jun-ichi & de Meza, David & Myles, Gareth D., 1997. "In praise of inequality: public good provision and income distribution," Economics Letters, Elsevier, vol. 57(3), pages 289-296, December.
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    Cited by:

    1. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.

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    More about this item

    Keywords

    public good; Nash equilibrium; Lindahl equilibrium; income distribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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