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Bequests and Cost-Benefit Analysis

Author

Listed:
  • Niskanen, Esko
  • Glazer, Amihai
  • Kanniainen, Vesa

Abstract

Consider a public project which produces a consumption good and which benefits future generations. Let a conventional cost-benefit analysis find that it gives higher benelits than projects it would displace in the private sector. Voters may nevertheless oppose the public project. The cause of the opposition arises from the absence of property rights and from the bequest motive of parents. Private projects have owners, allowing parents to control whether their children will receive the benefits from such projects. Parents can therefore pay for services from their children by giving them title to private projects. In contrast, public projects yield benefits to future generations independently of the care children give their parents.

Suggested Citation

  • Niskanen, Esko & Glazer, Amihai & Kanniainen, Vesa, 1996. "Bequests and Cost-Benefit Analysis," Discussion Papers 117, VATT Institute for Economic Research.
  • Handle: RePEc:fer:dpaper:117
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    Keywords

    public project; bequests; property rights; cost-benefit analysis; Macroeconomic policy; Talouspolitiikka; Labor market and policies promoting economic growth; Työmarkkinat ja kasvua tukeva politiikka; D610 - Allocative Efficiency; Cost-Benefit Analysis (contingent valuation); E600 - Macroeconomic Policy Formation; Macroeconomic Aspects of Public Finance; Macroeconomic Policy; General Outlook: General; H500 - National Government Expenditures and Related Policies: General;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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