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Public Provision of Private Goods and Equilibrium Unemployment


  • Aronsson, Thomas

    () (Department of Economics, Umeå University)

  • Markström, Mikael

    () (Department of Economics, Umeå University)

  • Sjögren, Tomas

    () (Department of Economics, Umeå University)


This paper concerns public provision of a private good in a two-type model with optimal nonlinear income taxation. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by unemployment. We show that, if the labor market is imperfectly competitive, additional mechanisms arise via the self-selection constraint, which may justify either more or less public provision of the private good than under perfect competition. Furthermore, public provision of private goods becomes a tool to influence the employment.

Suggested Citation

  • Aronsson, Thomas & Markström, Mikael & Sjögren, Tomas, 2004. "Public Provision of Private Goods and Equilibrium Unemployment," Umeå Economic Studies 628, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0628

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    References listed on IDEAS

    1. Kahneman, Daniel & Ritov, Ilana & Schkade, David A, 1999. "Economic Preferences or Attitude Expressions?: An Analysis of Dollar Responses to Public Issues," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 203-235, December.
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    3. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
    4. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, May.
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    6. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, May.
    7. W. Michael Hanemann, 1984. "Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(3), pages 332-341.
    8. Jesus Barreiro & Mercedes Sanchez & Montserrat Viladrich-Grau, 2005. "How much are people willing to pay for silence? A contingent valuation study," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1233-1246.
    9. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    10. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
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    Cited by:

    1. Aronsson, Thomas & Wehke, Sven, 2008. "Public goods, unemployment and policy coordination," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 285-298, May.
    2. Thomas Aronsson & David Granlund, 2014. "Present-Biased Preferences and Publicly Provided Private Goods," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 169-199, June.

    More about this item


    Public provision of private goods; nonlinear taxation; unemployment;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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