Vote with their donations: An explanation about crowding-in of government provision of public goods

Ryo Ishida

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: This paper considers a mechanism where providers of public goods reflect donors f preferences for public goods. When asking individuals and private companies to contribute for a certain public good, it is widely known that the total contributions result in under-provision. Among the many countermeasures for this problem, some fundraisers adopt a measure to reflect large donors f preferences for the characteristics of public goods. In such a case, private contribution is enhanced because there is additional incentive to donate. We formalized such a measure theoretically and proved that this measure surely enhances private contributions. Moreover, we find that government direct subsidy may not only crowd-out but also even crowd-in private contribution under this framework. If fundraisers reflect the major donors f preference, the influence of one fs donation is leveraged by government direct provision. This element enhances private contributions. If this effect dominates the innate crowding-out effect, government direct subsidy may enhance private contribution. This mechanism is a novel explanation for both crowding-out and crowding-in under an identical framework.

Keywords: private provision; public goods; crowding out; crowding in; voting (search for similar items in EconPapers)
JEL-codes: H23 H41 H44 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-10
New Economics Papers: this item is included in nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:mof:wpaper:ron272

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