Preferences For Public Goods Research Articles

Public goods and diversity in democracies and non‐democracies

AbstractThis paper analyzes how ethnic diversity affects the provision of public goods in democratic and non‐democratic societies when political parties compete for voter support by offering a mix of private and public goods. Our model implies that increasing diversity that leads to more heterogeneous preferences for public goods decreases the provision of public goods in democracies, where political power is distributed equally among citizens, while there is a weaker or no effect in non‐democracies, where political power is distributed unequally among citizens. When measuring diversity by ethnic fractionalization and public good provision by either levels of government expenses, expenditures on health, or life expectancy, we indeed observe a negative association between diversity and the provision of public goods in democracies but no or only a weak association in non‐democracies.

Quotidian crime, wartime violence and public goods preferences: Evidence from Liberia

Much of the literature on victimization looks at the effect of organized violence (OV) on civilian perceptions and behaviour. Yet citizens in countries experience quotidian crime (QC) on a daily basis. QC differs from OV, the former being more isolated, while the latter is more of a collective experience. As such we develop a theoretical framework that explores the effects of both types of violence on preferences for public goods. Victims of OV may prefer welfare public goods for the entire community, whereas victims of QC may prefer security for themselves. We also test the effects of compound victimization on public goods’ preferences. We use original survey data from rural Liberia to test our hypotheses and find support for our argument. Our results show the importance of a disaggregated approach to understanding the effects of violence on preferences.

The Reliability of Willingness-to-Pay Responses in the Contingent Valuation Method: A New Single-Sample Approach

The Contingent Valuation (CV) Method, like other stated preference techniques, seeks to measure economic preferences for public goods. Throughout the development and application of this non-market procedure, the accuracy of the measured preferences has been front-and-centre among practitioners and potential users. The most important issue of debate has been the extent to which the method can reliably measure economic preferences. In this article, a new methodology is described that enables multiple indicators of latent preferences. Multiple-indicator CV (MCV) enables the application of reliability analyses that are well established in psychology and sociology and represent the foundation of evaluating the measurement of latent variables. Furthermore, with the new MCV approach, the reliability of measurement at the individual level can be assessed in a single administration of the MCV survey thereby alleviating any need for longitudinal methodologies or comparison of mean estimates with other valuations of the same ecosystem service or public good should these be available. Once adequate reliability is established, the multiple-indicator framework supports the estimation of mean values via existing econometric techniques. With greater confidence in the reliability of measured contingent values, the interpretation of validity tests is enhanced.

Valuing Depression Using the Well-Being Valuation Approach

The continuously dramatic rise of the number of people suffering from depression is attracting an increasing demand for effective ways of preventing depression. Besides the need for new interventions, there is also a continuous call for a more robust framework for economic evaluation of public interventions. Taking into account people’s preferences for public goods is not straightforward to quantify, and therefore, in addition to designing a new technique for valuing nonmarket goods and services, it is equally important to use valuation methods that are not yet established as traditional. One less commonly used method to assess the cost of depression in monetary terms is the well-being valuation method or the life satisfaction approach, which requires answers to only a few questions that are significantly less time demanding for the respondents than more traditional approaches. We added a well-being question to a contingent valuation web-survey that describes hypothetical interventions aimed to prevent depression in Sweden and estimated that the loss in life satisfaction for individuals who experienced depression varies between approximately 350 and 45,000 euros per year. The monetary compensation would be, on average, higher for individuals who experienced own depression than for those who know someone near, family or friend, who experienced depression, for men than for women, and for middle-aged than for younger and older individuals, respectively.

An empirical review of the effect of climate change on agriculture: a contingent valuation method

This study is an empirical review of the effect of climate change on agriculture: a contingent valuation method. The paper relied on content analysis of extant literature. The paper viewed contingency valuation or the Contingent Valuation Method (CVM) is an economic, non-market based valuation method especially used to infer individual's preferences for public goods, notably environmental quality and more precisely it is used to place a monetary value on nonmarket goods. Available of the literature investigated suggest that there is a paucity of empirical literature in this area of study. However, findings from the empirical literature showed that climate impact negatively on agricultural production which suggests the need for proactive a mitigation and adaptation policy measures to help address the consequences of extreme events of climate change.

Ethnic Diversity, Social Norms and Elite Capture: Theory and Evidence from Indonesia

Elite capture is a natural concern regarding decentralization. We highlight the effects of ethnic diversity and social norms on the extent of such capture. Ethnic diversity, through differences in the preference for public goods, facilitates capture. However, this may be counteracted by social norms that promote cooperative behaviour within communities. We test these theoretical predictions using community‐level data from the 1997 and 2007 Indonesian Family Life Survey rounds, with fiscal decentralization being implemented in between. We exploit a particular institutional feature of Indonesian communities—namely, the observance of traditional ‘Adat’ laws to proxy coordination across ethnic groups. Overall, we find that ethnic diversity depresses community‐level development spending after decentralization, particularly where Adat laws (which promote an ethic of mutual cooperation) are not followed. The opposite is observed for spending on non‐developmental items.

Mapping potentials and challenges of choice modelling for social science research

This paper argues that choice modelling is a useful approach for all social sciences, while at the same time disciplines such as sociology and political science can contribute significantly to the future development of choice modelling. So far choice modelling has mainly been applied in disciplines that investigate types of consumption choices, be it marketing to investigate preferences for new products, transportation to analyse mode choices, or environmental economics to elicit preferences for public goods. However, using the information that can be gained from individual choices among mutually exclusive alternatives has gained increasing popularity in other disciplines as a powerful tool to test theoretical hypotheses and generate insights into individual behaviour. Examples are the acceptance of refugee shelters in peoples’ neighbourhood, the choice of where to commit a crime or the evolution of social networks. A good point of departure for an expansion of choice modelling within the social sciences is the common foundation that many disciplines share that are gathered under the umbrella of social sciences. Research traditions and theoretical models include rational choice concepts, and choice modelling can be linked to cross-cutting methods, including agent-based models, network analysis, and machine learning. At the same time, disciplines can complement each other in studying choice behaviour, as they can contribute concepts and tools less familiar to the other disciplines. Finally, all social science disciplines face challenges when it comes to issues such as causal analysis, heterogeneity in decision rules, joint decision making, or big data. Choice modelling and a cross-disciplinary dialogue can contribute to meeting these challenges.

The effect of regional income inequality and social diversity on the provision of local public goods in Indonesia

PurposeThe purpose of this paper is to quantify the effects of regional income disparity and social diversity on local public goods delivery in Indonesia.Design/methodology/approachUsing Indonesian provincial data over the period 2001–2014 and by way of System GMM, this paper circumvents endogeneity and persistence of key variables over time which may bias the estimated impact of the critical variables.FindingsThe result provides no significant evidence on the influence of regional income inequality on the provision of local public goods. The result reveals that ethnic diversity is associated with the more extensive provision of local public goods. A large difference in preferences toward public goods provision in a fragmented society such as Indonesia forces the local government to deliver a greater mixed of public goods to accommodate various preferences for public goods and ensure that each group has equal access to public goods. Political fragmentation within an ethnically heterogeneous society also encourages local politicians to provide a larger provision of public goods to form an inter-ethnic coalition to gain local political access.Practical implicationsThe significant effect of ethnic diversity on public goods provision implies a set of policy recommendation for Indonesian Government in order to maintain peace within the country. The central government should establish a clear-cut standard of local public goods provision for local governments to ensure that that anyone has equal access to public goods regardless of ethnicity. This will mitigate the possibility of ethnic conflict in an ethnically plural society.Originality/valueThis paper extends its analysis using both fractionalization and polarization indexes to measure the social diversity in Indonesia to obtain a comprehensive knowledge regarding the influence of ethnic diversity on the public good provision. This paper proposes a set of policy recommendation for Indonesian Government to manage the effect of social diversity on the provision of local public goods. To the author’s knowledge, this has never been done before for Indonesia.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-12-2018-0661

Diversity and Conflict.

This research advances the hypothesis and establishes empirically that interpersonal population diversity, rather than fractionalization or polarization across ethnic groups, has been pivotal to the emergence, prevalence, recurrence, and severity of intrasocietal conflicts. Exploiting an exogenous source of variations in population diversity across nations and ethnic groups, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, the study demonstrates that population diversity, and its impact on the degree of diversity within ethnic groups, has contributed significantly to the risk and intensity of historical and contemporary civil conflicts. The findings arguably reflect the contribution of population diversity to the non-cohesivnesss of society, as reflected partly in the prevalence of mistrust, the divergence in preferences for public goods and redistributive policies, and the degree of fractionalization and polarization across ethnic, linguistic, and religious groups.

The logic of basic education provision and public goods preferences in Chinese fiscal federalism.

Without election or re-election motivations, what factors have impacted public goods preferences in an authoritarian country such as China? More specifically, what makes political elites be devoted to or not be devoted to local public goods provision? This study, using basic education provision as an example, intends to gauge the impact of leadership selection on public goods provision in China. It is found that career trajectories of politicians have a bearing on basic education provision. The findings suggest that even under a top-down appointment system, homegrown politicians are more willing to cater to local preferences, especially on basic education provision, which suggests an extension of Riker’s theory, applied in a non-democratic regime. Numerous studies have examined the impacts of decentralization on a variety of aspects of public governance in different contexts. Nevertheless, the unique contribution of this study is its policy implication that political centralization may not be an effective solution for local public governance even in an authoritarian context.

The Invisible Arm of Government: Some Reflections on the Political Psychology of Public Goods and Services

This paper argues that the important work of government often goes unnoticed in the public mind because of how public goods and services are experienced psychologically by citizens. Specifically, it suggests that several cognitive mechanisms and biases—habituation, inattentional blindness, negativity bias, attribution error, and present bias—combine to shape public awareness and subjective evaluations of government. These theoretical ideas are illustrated in the case of specific public services, and a few practical ideas are proposed to address the problem. Importantly, these various mechanisms and biases can have important political consequences to the extent they influence preferences for public goods and services in the political process.

But It Only Benefits Them! The Influence of Social Ties on Taxation

Purpose This paper concerns the influence of social ties with ‘others’ – people outside of one’s close-knit social groups - on tax morale and tax revenues. It is hypothesised that such social ties decrease in-group favouritism, changing citizens’ preferences for public goods and redistribution, and, thereby, increase tax morale. This increase in tax morale impacts tax policies and tax compliance, raising tax revenues. Approach I test the first part of this hypothesis – the relationship between social ties and tax morale – by using individual-level data and the first factor of three trust variables as a proxy for social ties with ‘others’. To determine whether social ties influence tax revenues, I rely on a historic, exogenous proxy of social ties with ‘others’ based on a project carried out in developing countries by Adelman and Morris in the 1960s. Findings The evidence does not reject the hypothesis that people with stronger social ties with ‘others’ have greater tax morale and that this translates into higher tax revenues. Originality The literature overwhelmingly views taxation from an atomistic individualist methodology. Viewing taxation from an organic interdependence methodology, this paper provides the first empirical evidence of the influence of social ties on taxation.

Personality and economic choices

There is substantial variation in individual preferences for public goods, yet much of that variation remains poorly understood. However, simple measures of personality can help to explain economic values and choices in a systematic way. In this paper, we examine the effects of personality on individual economic choices over public environmental goods. Based on three datasets from three separate stated preference studies, we use a hybrid choice econometric framework to examine the effects of personality on preferences for the status quo, changes in environmental quality, and costs of investing in environmental improvements. We find effects that are consistent across all datasets. Personality, a stable feature of an individual's character that is simple to measure, enriches explanations of why the demand for environmental goods varies across people, provides an indication of how different people are likely to react to the introduction of environmental policies, and explains substantial differences in Willingness to Pay.

Heterogeneous Preferences for Public Goods Provided by Agriculture in a Region of Intensive Agricultural Production: The Case of the Marchfeld

The aim of this paper is to elicit the marginal willingness to pay (MWTP) for the improved provision of public goods (PGs) by agriculture in a region of intensive agricultural production, embodying many of the environmental problems related to agriculture within and outside the European Union (EU). Our analysis was based on a participatory approach, combining the involvement of local stakeholders and a discrete choice experiment (DCE) in the Marchfeld region in Austria. We estimated a random parameters logit model (RPL), including interactions with socio-demographic factors, to disentangle preference heterogeneity and find a positive MWTP of the local population for all three PGs analyzed: (i) groundwater quality; (ii) landscape quality; and (iii) soil functionality in connection with climate stability. Furthermore, MWTP varies considerably with respect to age, farmers/non-farmers and locals/incomers. Further research could combine the results of this demand-side valuation with those of a supply-side valuation, where the opportunity costs of different management options for farmers are estimated. Based on such a cost–benefit analysis and further participation of local stakeholders, new governance mechanisms for the smart and sustainable provision of PGs by agriculture could be developed for the Marchfeld region and for comparable European regions.

A Consequential Contingent Valuation Referendum: Still Not Enough to Elicit True Preferences for Public Goods!

AbstractWhether respondents disclose their preferences truthfully in surveys that are used to assess the values of public goods remains a crucial question for the practical application of stated preference methods. The literature suggests that in order to elicit true preferences, respondents should see a valuation survey as consequential: they must believe in the actual consequences that may follow from the survey result. Drawing on recent empirical findings, we develop a model depicting the importance of the consequentiality requirement for truthful preference disclosure in a survey that evaluates a public policy project based on a referendum-format value elicitation question. First, we show that a respondent’s belief that his vote may influence the outcome of the referendum plays a central role for revealing his preferences truthfully. Second, we find that the subjectively perceived probabilities of the successful provision of the public good and of the collection of the payment related to the project implementation not only need to be positive but also to be in a particular relationship with each other. This relationship varies in respondents’ preferences towards risk.

Eliciting Preferences for Public Goods in Nonmonetized Communities: Accounting for Preference Uncertainty

One major challenge when conducting contingent valuation studies in developing countries is the choice of the appropriate payment vehicle. Since regular cash-income does not exist for the majority of the population and market integration is low, households in rural areas have less experience with monetary exchanges. In these cases labour time may be a more appropriate payment vehicle. A common finding of studies using labour time as the payment vehicle is that households are more often willing to contribute working time as compared to money. However, so far empirical evidence is missing if the labour time elicitation format reduces respondent’s uncertainty of contributions. In this study we analyze and compare uncertainty of people’s stated willingness to contribute (WTC) time and money for a local public good in a non-monetized small-scale community in Bougainville, Papua New Guinea. We do so by establishing an open-ended method for eliciting people’s WTC, the Range-WTC-method, which elicits the upper and lower bound of a person’s WTC. We find that uncertainty is reduced when respondents are asked for labour time contribution instead of monetary contributions. Thus, we provide empirical evidence that, indeed, labour time is the preferred to money in the elicitation of stated WTC in non-monetized communities.

Diversity and Conflict

This research advances the hypothesis and establishes empirically that interpersonal population diversity, rather than fractionalization or polarization across ethnic groups, has been pivotal to the emergence, prevalence, recurrence, and severity of intrasocietal conflicts. Exploiting an exogenous source of variations in population diversity across nations and ethnic groups, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, the study demonstrates that population diversity, and its impact on the degree of diversity within ethnic groups, has contributed significantly to the risk and intensity of historical and contemporary civil conflicts. The findings arguably reflect the contribution of population diversity to the non-cohesivnesss of society, as reflected partly in the prevalence of mistrust, the divergence in preferences for public goods and redistributive policies, and the degree of fractionalization and polarization across ethnic, linguistic, and religious groups.

Land use, worker heterogeneity and welfare benefits of public goods

We show that investments in public goods change the optimal land use in their vicinity, leading to additional welfare benefits. This occurs through two sorting mechanisms. First, availability of public goods leads to higher population densities. Second, population groups sort according to their preferences for public goods. We develop a structural spatial general equilibrium model that accounts for these effects. The model is estimated using data on transport infrastructure, commuting behaviour, land use and land rents for some 3000 ZIP-codes in the Netherlands and for three levels of education. Welfare benefits of investments in public transport infrastructure are shown to differ sharply by workers’ educational attainment. Welfare gains from changes in land use account for up to 30% of the total benefits of a transport investment.

Why the intrinsic value of public goods matters

Existing accounts of public-goods distribution rely on the existence of solidarity for providing non-universal public goods, such as the humanities or national parks. There are three fundamental problems with these accounts: they ignore instances of social fragmentation; they treat preferences for public goods as morally benign, and they assume that these preferences are the only relevant moral consideration. However, not all citizens unanimously require public goods such as the humanities or national parks. Public-goods distribution that is based only on citizens’ preferences, therefore, means that non-universal public good are at a constant risk of under-provision, and has negative implications for human flourishing. The paper, therefore, develops a complementary justification for the distribution of public goods, that decouples the distribution of public goods from ad hoc preferences, and grounds the distributive justification in the intrinsic value of these goods. There are three reasons to include intrinsic-value considerations in public-goods distribution: responding to crowding-out effects; promoting shared heritage and cross-fertilization. Finally, the intrinsic-value justification may indirectly promote solidarity. Thus, the intrinsic-value and the solidarity justifications need not be mutually exclusive, rather they can be mutually reinforcing.

Mechanisms for the control of fiscal deficits

This paper shows that a simple two-stage voting mechanism may implement a constrained optimal state dependent decision about the size of the fiscal deficit. I consider a setup with strategic fiscal deficits similar to Alesina and Tabellini (1990). Three groups of voters are informed about the relative desirability of current public spending. Voters differ in their preferences for public goods and swing voters’ preferences may change over time. The current government decides on the current spending mix and it has an incentive to strategically overspend. A simple two-stage mechanism under which a deficit requires the approval by a supermajority in parliament approximates a constrained optimal decision and under certain conditions increases social welfare relative to both a strict rule and a laissez faire constitution. When the current majority is small, political bargaining may further increase social welfare. However, when the current majority is large, a supermajority mechanism with bargaining leads to a biased spending mix and it may reduce welfare whereas the laissez faire mechanism may yield the first best. An appropriately adjusted majority threshold can avoid inefficient bargaining whenever necessary.