Optimal public policy and endogenous preferences: an application to an economy with for-profit and non-profit enterprises

Luigi Bonatti (luigi.bonatti@economia.unitn.it)

No 713, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

Abstract: We present a general equilibrium model where profit-maximizing firms and non-profit organizations coexist, and the people�s propensity to devote efforts to non-profit activities increases with the stock of social capital. In its turn, the formation of social capital is stimulated by an increase in the aggregate volume of non-profit activities. Therefore, a public policy subsidizing the nonprofits has an indirect effect on people�s preferences concerning the effort to devote to these organizations via its positive impact on the accumulation of social capital. Within this framework, we analyze the optimal policies of a government facing myopic or rational agents.

Keywords: Myopic behavior; Work effort; Social capital; Altruism; Third sector. (search for similar items in EconPapers)
JEL-codes: D11 D60 H20 J30 L31 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-pbe and nep-soc
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