Different Approaches to Provide Public Goods from Private Sectors in Chinese Rural Areas

Abstract

The dilemma of resource is a prominent problem in the current practice of public goods supply. How to improve the efficiency of public goods supply has aroused widespread attention. Generally, public goods are provided by government due to its free-rider problems. However, in some mountainous areas in China, some self-organized compounds voluntarily provide public goods to meet villagers’ demand. This unselfish behavior contradicts the common way of provision of public goods in China but has emerged and expanded in rural areas. To trace the root of these seemingly abnormal event, the essay finds that family ties, cultural and geographical factors contribute to private provision of public goods. In addition, Studies have found that organizing farmers is an important starting point for forming effective social connections. Compared with government, since the self-organized compounds are based on a network of social relations, private provision in rural areas achieves a relative low-cost supervision and efficient management. Economically speaking, the ‘clan culture background’ of villages can act as a supervision and punishment mechanism, avoiding problems such as mismatch between supply and demand, high transaction costs, and inefficient use of resources.