Private Provision Of Public Goods Research Articles

THE DYNAMICS OF CLIMATE AGREEMENTS

I study dynamic private provision of public goods (or bads) when agents (or countries) can invest in cost-reducing technologies and sign incomplete contracts. The model leads to a dynamic common pool problem that is more severe than its sta- tic counter-part. Nevertheless, a sequence of short-term agreements on contribution levels makes everyone worse osince countries invest less when they anticipate fu- ture negotiations. Long-term agreements induce countries to invest more. The best agreement is more demanding if the time horizon of the agreement is short and the externality from investing large (e.g., if the patent system is weak). If investments can be subsidized, the subsidy should be larger if the agreement is short-lasting. The …rst best can always be implemented by long-term agreements with renegotia- tions. The results have implications for the optimal design of climate treaties and they hold whether permits are tradable, non-tradable or if instead emission taxes are used.

Is Unemployment Good for the Environment?

Environmental quality is a public good, potentially impacted by everybody. Individual level pro-environmental behavior affects environmental quality in the aggregate. Therefore, it is important to understand what causes individual’s pro-environmental behaviors to change. We quantify the causal effect of one determinant, unemployment, using an EU-27 population representative Eurobarometer survey. Drawing on results from the theory of the private provision of public goods, and recognizing that unemployment decreases income and the opportunity cost of time, we formulate testable predictions that unemployment will decrease the extent of pro-environmental behaviors that require monetary contributions and increase the extent of pro-environmental behaviors that mainly require time/effort. Instrumental variables regressions provide empirical evidence to support these hypotheses. Changes in the unemployment rate within a sub-national region provide the exogenous variation needed to identify the causal effect. Several supplemental questions on the survey provide evidence that environmental issues lose saliency and economic issues gain saliency when one becomes unemployed, suggesting that interested parties may wish to emphasize cost savings of pro-environmental behavior rather than environmental benefits during times of increased unemployment.

On the private provision of public goods on networks

This paper analyzes the private provision of public goods where consumers interact within a fixed network structure and may benefit only from their direct neighbors' provisions. We present a proof of the existence and uniqueness of a Nash equilibrium for general networks and best-reply functions. In addition, we investigate the neutrality result of Warr [38] and Bergstrom, Blume, and Varian [6] whereby consumers are able to undo the impact of income redistribution as well as public provision financed by lump-sum taxes. To this effect, we show that the neutrality result has a limited scope of application beyond a special network architecture in the neighborhood of the set of contributors.

Using field experiments to address environmental externalities and resource scarcity: major lessons learned and new directions for future research

This article provides an overview of the use of field experiments in energy and resource economics. I concentrate on two areas of study; field experiments that (i) speak to the use of dynamic pricing plans to manage the use of electricity and water and (ii) explore the adoption of energy saving technologies. Viewed in its totality, this work suggests that both neo-classical factors, such as prices or search costs, and behavioural constructs, such as salience or social norms, influence the use of energy and water. For academics, the studies reviewed provide a deeper understanding of individual behaviour and the factors that drive the private provision of public goods. For policy-makers, the studies reviewed provide a blueprint outlining ways to combine insights from neo-classical and behavioural economics to manage energy/water demand and mitigate externalities generated through their use.

The impact of burden sharing rules on the voluntary provision of public goods

We investigate how burden sharing rules impact the voluntary provision of a public good which generates heterogeneous benefits to agents. We compare different rule-based contribution schemes where agents can first suggest a minimum provision level of the public good, before the smallest common denominator is implemented. We find that rule-based contribution schemes significantly increase payoff levels relative to the VCM, while significant differences exist between the rules. Importantly, the equal-payoff rule maximizes payoffs for all player types. This also holds relative to a scheme where different types of players separately can determine their minimum contribution levels. Our results lend insights into the efficient institutional design for voluntary private provision of public goods, and how burden sharing rules interact with efficiency when agents are heterogeneous.

Within-group cooperation and between-group externalities in the provision of public goods

Using a simple two-group model of the private provision of public goods, this paper investigates the endogenous formation of within-group cooperation. We show that the equilibrium outcomes may result in a prisoners’ dilemma, depending on the characteristics of between-group externalities. If between-group externalities are strongly positive (negative), within-group cooperation does not occur in either group, which leads to Pareto-inferior (superior) outcomes for all agents. On the other hand, if between-group externalities are weakly positive or negative, each group chooses to cooperate within a group in providing public goods, but it may reduce utility of both group members. Our simple framework is applicable to a wide variety of socio-economic problems such as an arms race, advertising competition, transboundary pollution, and antiterrorism measures.

The Signaling Role of Corporate Social Responsibility

We examine the role of CSR as a mechanism for private provision of public goods. We argue that corporations are using CSR to signal high product quality and demonstrate that signaling gives rise to an excessive level of contributions that offsets the positive externality, which causes the under-provision of public goods. We analyze the tax policy implications of such assertion. Accounting for this offset would call for a decrease in (and potentially elimination of) the subsidy offered to corporations engaged in CSR activities.

Toward an efficiency rationale for the public provision of private goods

Public provision of a private goods is justified on efficiency grounds in a model with no redistributive preferences. A government’s involvement in the provision of a private good generates information about preferences that facilitates more efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is always fulfilled under independence and satisfied for an open set of joint distributions. The efficiency gains require that consumers cannot arbitrage the publicly provided private good, so our analysis applies to private goods where it is easy to keep track of the ultimate user, such as schooling and health care, but not to easily tradable consumer goods.

Rewards and the private provision of public goods on dynamic networks

We study an evolutionary model of a public good game with rewards played on a network. Giving rewards to contributors transforms the game but gives rise to a second-order dilemma. By allowing for coevolution of strategies and network structure, the evolutionary dynamics operate on both structure and strategy. Players learn with whom to interact and how to act and can overcome the second-order dilemma. More specifically, the network represents social distance which changes as players interact. Through the change in social distance, players learn with whom to interact, which we model using reinforcement dynamics. We find that, for certain parameter constellations, a social institution, prescribing prosocial behavior and thus solving the second-order dilemma, can emerge from a population of selfish players. Due to the dynamic structure of the network, the institution has an endogenous punishment mechanism ensuring that defectors will be excluded from the benefits of the institution and the public good will be supplied efficiently.

Public Versus Private Provision of Public Goods

AbstractIt is well known that public goods are underprovided in a static setting with voluntary contributions. Public provision—in a median voter framework with proportional taxation—generally exceeds private provision. This paper compares private and public provision of public goods in a dynamic setting. In a dynamic setting, voluntary donations can result in efficient provision. Also, majority‐rule solutions exist even when taxes are not proportional to income. At low discount factors, public provision tends to exceed private provision. As patience increases, however, private provision may exceed public provision. This occurs because many outcomes with a low level of public good provision—and potentially large targeted transfer payments to particular individuals—become sustainable under public provision. Under private provision, however, large targeted transfers are unsustainable. To finance the public good, private provision tends to result in benefit taxation, and public provision tends to result in progressive taxation.

Increasing Private Provision of Public Goods Through a Lottery Policy: An Application to Sales Tax Evasion

The aim of this work is to explain the success registered by a zero-cost policy against sales tax evasion based on a lottery mechanism which has been recently implemented in a growing number of countries. It is suggested how the specific sales tax evasion situation in which this policy has been applied could be traced back to a general public goods framework. After a discussion of the empirical evidences showing the policy success, we propose a theoretical model incorporating Tversky and Kahneman’s (1992) Cumulative Prospect Theory insights. Furthermore, a test for verifying the applicability of the lottery ticket policy in specific contexts is developed. Such a test could represent a useful ex-ante indicator of the expected success of the lottery ticket policy for policymakers interested in increasing the private provision of public goods.

When Business Meets Aid: Analysing Public-Private Partnerships for International Development

International development agencies are increasingly looking to business as a partner in achieving development outcomes. Engaging business in development has become a central plank of many countries’ aid policies. However, the potential of public-private partnerships for development is still largely unrealised. Business and development agencies would benefit from a better understanding of what forms of practical partnership might be constructed, for what purposes and with what likely impact. We propose a new framework for thinking about practical engagement between business and development agencies. It is based, in the first instance, on a distinction between partnerships that increase the development impact of core business activity, and those that contribute to the private provision of public goods. Within this framework we discuss development agencies’ existing involvement in inclusive business ventures, pro-poor supply chain initiatives for internationally-traded products, public-private partnerships for service delivery, and product development partnerships in health. In each of these four areas we provide short case studies and identify a set of issues for further consideration in future work. We close with some observations on cross-cutting issues, including the slenderness of the evidence base in this field, and the fragmentation of existing initiatives. Our main conclusions are three. First, the next generation of enterprise challenge funds should be designed on the basis of a broad evaluation of their predecessors and explicit consideration of a set of issues that we identify. Second, more effective brokerage arrangements, and some flagships, will be needed in order to expand public-private partnerships for service delivery. Third, a comprehensive review of product development partnerships should be undertaken which, among other things, compares them to market-based alternatives.

Demand-side Value for Ecosystem Services and Implications for Innovative Markets: Experimental Perspectives on the Possibility of Private Markets for Public Goods

Environmental economists invest in measuring the value of the environment but put less effort toward integrating that value directly into the economy. Experimental economists evaluate the performance of mechanisms to fund public goods but in some cases offer limited insight into practical implications for developing markets. This discussion presents initial insights into applying mechanisms for private provision of public goods based on demand-side values rather than regulatory-based market incentives such as cap-and-trade policies. Consideration of mechanisms to generate revenue inspires field tests that could direct experiments using threshold public goods and Lindahl's framework toward applications that transform value into revenue.

Capabilities and Strategic Entrepreneurship in Public Organizations

Public organizations are relatively understudied in the strategic entrepreneurship literature. In this article, we submit that public organizations are usefully analyzed as entities that create and capture value in both the private and public sectors and that a capabilities lens sheds important new insights on their behavior. As they try to create and capture value, public organizations can act entrepreneurially by creating or leveraging bundles of capabilities, which may then shape subsequent entrepreneurial action. Such processes can involve complex interactions among public and private actors. For example, public organizations often partner with private firms to produce existing products, create new products, and establish new markets which, in turn, generate new capabilities for both public and private actors. Yet such coevolutionary processes are not guaranteed to create value, and capabilities acquired in the pursuit of public interests may, over time, enable activities that damage those same interests. We show how a capabilities approach helps explain the nature and evolution of public organizations and we apply this approach to a series of cases on the growth and diversification of public organizations, the private provision of public goods, and related issues. Copyright © 2013 Strategic Management Society.

Public versus Private Provision of Public Goods

It is well known that pure public goods are underprovided in static games with private, voluntary contributions. Public provision is usually modeled using a median voter framework, in which the public good is funded by a proportional income tax. This paper compares the private and public provision of public goods in dynamic settings. With private provision, it is possible to sustain cooperation and provide the public good efficiently. With public provision, dynamic majority-rule solutions exist even when taxes are not restricted to be proportional to income; thus, income redistribution can be chosen jointly with the level of the public good. At low discount factors, private provision tends to result in lower levels of the public good relative to public provision. As patience increases, however, public provision results in lower levels of the public good than private provision. This occurs because higher levels of income redistribution are sustainable under public provision. Such redistribution becomes increasingly feasible at higher discount factors, resulting in income subsidies for particular groups instead of higher levels of the public good. In contrast, under private provision, all groups are forced to settle for increases in the level of the public good. In terms of financing the public good, private provision tends to result in benefit taxation, with little variation in individual contribution rates. Public provision allows a wider range of tax rates, although there is a tendency towards benefit taxation when preferences vary and progressive taxation when incomes vary.

Private Provision of Public Goods and Information Diffusion in Social Groups

We describe a model of fundraising in social groups, where private information about quality of provision is transmitted by social proximity. Individuals engage in voluntary provision of a pure collective good that is consumed by both neighbors and non-neighbors. We show that, unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors. These incentives are stronger, and provision of the pure public good greater, the smaller are individuals’ social neighborhoods.

The Cost of Segregation in Social Networks

This paper investigates the private provision of public goods in segregated societies. While most research agrees that segregation undermines public provision, the findings are mixed for private provision: social interactions, being strong within groups and limited across groups, may either increase or impede voluntary contributions. Moreover, although efficiency concerns generally provide a rationale for government intervention, surprisingly, little light is shed in the literature on the potential effectiveness of such intervention in a segregated society. This paper first develops an index based on social interactions, which, roughly speaking, measures the welfare impact of income redistribution in an arbitrary society. It then shows that the proposed index vanishes when applied to large segregated societies, which suggests an “asymptotic neutrality” of redistributive policies.

Ethnic Heterogeneity and the Private Provision of Public Goods

Theoretically, more ethnic heterogeneity may lead to higher aggregate provision of privately provided public goods if ethnic heterogeneity increases the uncertainty about the aggregate level of public good provision. Empirical results in this article, which are based on household survey data from Kampala, Uganda, show robust evidence that an increase in ethnic heterogeneity is associated with an increase in the willingness to contribute to public goods. The findings suggest that the mechanism, through which public goods are provided, that is whether they are provided publicly or privately, is important in understanding the role of ethnic diversity in public goods provision.

Being the best or doing the right thing? An investigation of positional, prosocial and conformist preferences in provision of public goods

Based on a simple theoretical framework, we show that when individuals exhibit positional, prosocial or conformist preferences which are endogenous, the end outcomes in terms of private provision of public goods can differ significantly from traditional neo-classical predictions. Indeed, when a given individual selects a specific subset of preferences according to what others do, he/she will contribute positively to the public good provision. We provide anecdotal evidence to support our theoretical analysis by using data from an Internet survey on a sample of French individuals. Analyses of individual responses confirm our theoretical arguments. For instance, we show that relative concerns matter, that is, for several environmental goods, people might prefer polluting more in absolute terms but less than others in society. Moreover, we also test whether people exhibit a social desirability bias and show that they attribute more (less) positional (prosocial) concerns to others in society.

Private Provision of Public Goods: Neutrality and Wealth-Dependent Preferences

Several authors have investigated the bounds of the so-called neutrality theorem where public goods are privately provided. Following this line of analysis, I investigate further in this paper the bounds of this result. I concentrate on an unexplored case in the existing literature — namely that where individual preferences for a public good are affected by respective levels of individual wealth. I prove that under such circumstances, the neutrality theorem no longer holds. More appealing, I discuss the conditions under which a redistribution of wealth might improve efficiency in the aggregate provision of public goods. Interestingly, we find that a redistribution of wealth from individuals who have a low valuation for public goods to those who have a high valuation for public goods does not necessarily increase its aggregate provision.