Dual Provision of Public Policies in Democracy

Christoph Luelfesmann ()
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Christoph Luelfesmann: Simon Fraser University, http://www.econ.sfu.ca/
Authors registered in the RePEc Author Service: Christoph Lülfesmann ()

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: This paper analyzes the provision of goods with consumption externalities (such as public policies) in hybrid settings: the `good' is provided in a democratic process by majority vote, but each individual agent is free to contribute additional amounts before or after the political decision has been made. Prominent examples include policy making in federal states, charities, and dual provision of health care. We show that regardless of the timing of private and public actions, the results of the median voter theorem apply. A move from a purely public system to a dual system with private ex-ante contributions is shown to be unambiguously preferred by everybody in society. In contrast, establishing an ex-post contribution regime may be opposed by a minority of high-preference individuals. The paper also derives results for a scenario with endogenous timing of private contributions. Most importantly, this general regime is shown to be majority preferred not only to the systems with ex-post and the ex-ante contributions, but also to an institutional setting with private but no public provision.

Keywords: Public goods; Majority voting; private provision; dual provision; federalism; charities; health care. (search for similar items in EconPapers)
JEL-codes: D02 D78 H11 H40 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
Date: 2007-10

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