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

Oskar Nupia

No 9801, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: 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.

Keywords: Public goods; private provision; neutrality theorem; income distribution (search for similar items in EconPapers)
JEL-codes: D31 (search for similar items in EconPapers)
Pages: 24
Date: 2012-07-02
New Economics Papers: this item is included in nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:009801

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