A Theory of Public Goods under Complementarity between Safety and Consumptions

Ikuto Aiba and Yasuhiro Sato
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Ikuto Aiba: Graduate School of Economics, The University of Tokyo

No CIRJE-F-1150, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We explore the theoretical properties of public good provision under the complementarity between safety and private/public good consumption. The presence of the mobile worker generates fiscal externality, making the equilibrium ineffcient. The direction of ineffciency is determined by three factors: the characteristics of the utility function, the difference in income between the immobile and mobile workers, and the immobile worker's marginal utility of hosting another mobile worker. We show that the complementarity between safety and private good consumption plays a crucial role in determining the impacts of the third factor whereas the complementarity between safety and public good does not.

Pages: 27 pages
Date: 2020-04
New Economics Papers: this item is included in nep-gen and nep-upt
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