Dual Provision of Public Policies in Democracy
This paper analyzes the provision of goods with consumption externalities (such as public policies) in hybrid settings: the `good' is provided in a democratic process by majority vote, but each individual agent is free to contribute additional amounts before or after the political decision has been made. Prominent examples include policy making in federal states, charities, and dual provision of health care. We show that regardless of the timing of private and public actions, the results of the median voter theorem apply. A move from a purely public system to a dual system with private ex-ante contributions is shown to be unambiguously preferred by everybody in society. In contrast, establishing an ex-post contribution regime may be opposed by a minority of high-preference individuals. The paper also derives results for a scenario with endogenous timing of private contributions. Most importantly, this general regime is shown to be majority preferred not only to the systems with ex-post and the ex-ante contributions, but also to an institutional setting with private but no public provision.
|Date of creation:||Oct 2007|
|Date of revision:|
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- Richard Cornes & Roger Hartley & Todd Sandler, 1999.
"Equilibrium Existence and Uniqueness in Public Good Models: An Elementary Proof via Contraction,"
Keele Department of Economics Discussion Papers (1995-2001)
99/02, Department of Economics, Keele University.
- Cornes, Richard & Hartley, Roger & Sandler, Todd, 1999. " Equilibrium Existence and Uniqueness in Public Good Models: An Elementary Proof via Contraction," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 499-509.
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"Collective Choice and Voluntary Provision of Public Goods,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 545-572, 05.
- Dennis Epple & Richard Romano, 2000. "Collective Choice and Voluntary Provision of Public Goods," NBER Working Papers 7802, National Bureau of Economic Research, Inc.
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- Gerhard Glomm & B. Ravikumar, 1998. "Opting out of publicly provided services: A majority voting result," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(2), pages 187-199.
- Rubinchik-Pessach, Anna, 2005. "Can decentralization be beneficial?," Journal of Public Economics, Elsevier, vol. 89(7), pages 1231-1249, July.
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