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Encouraging Private Ownership of Public Goods: Theory and Evidence from Belgium

Listed author(s):
  • Gani Aldashev

    ()

    (CRED and Department of Economics, University of Namur, and ECARES, ULB)

  • François Libois

    ()

    (CRED and Department of Economics, University of Namur)

  • Joaquín Morales Belpaire

    ()

    (CRED and Department of Economics, University of Namur)

  • Astrid Similon

    ()

    (CRED and Department of Law University of Namur)

We study short-run and long-run effects of a government subsidy to private nonprofit ownership of public good projects. In a simple model, we show that the subsidy increases the prices of project assets in the short run; however, the effect does not persist and prices decline in the long run. This happens because the subsidy temporarily relaxes the resource constraint of non-profit organizations, which allows them to engage in supply-expanding activities. We test this prediction using a unique dataset that we have constructed from Belgian notarial land-transaction records and exploiting a policy reform in public subsidies for land purchases by non-profits aiming at creating privately owned natural reserves. Using the MS-estimation method (Maronna and Yohai, 2000) robust to outliers, we also provide a methodological contribution to the analysis of markets with quasi-donations.

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File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1408.pdf
File Function: First version, 2014
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Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1408.

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Length: 36 pages
Date of creation: Jun 2014
Handle: RePEc:nam:wpaper:1408
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Web page: http://www.fundp.ac.be/en/eco

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  1. Andreoni, James & Payne, A. Abigail, 2011. "Is crowding out due entirely to fundraising? Evidence from a panel of charities," Journal of Public Economics, Elsevier, vol. 95(5), pages 334-343.
  2. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
  3. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
  4. Bilodeau, Marc & Steinberg, Richard, 2006. "Donative nonprofit organizations," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  5. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1343-1372.
  6. Vincenzo Verardi & Christophe Croux, 2009. "Robust regression in Stata," Stata Journal, StataCorp LP, vol. 9(3), pages 439-453, September.
  7. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
  8. James Andreoni & A. Abigail Payne, 2003. "Do Government Grants to Private Charities Crowd Out Giving or Fund-raising?," American Economic Review, American Economic Association, vol. 93(3), pages 792-812, June.
  9. Catherine Dehon & Marjorie Gassner & Vincenzo Verardi, 2011. "Extending the Hausman Test to Check for the presence of Outliers," Working Papers ECARES ECARES 2011-036, ULB -- Universite Libre de Bruxelles.
  10. Lester M. Salamon, 2010. "Putting The Civil Society Sector On The Economic Map Of The World," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(2), pages 167-210, 06.
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