All or nothing: State capacity and optimal public goods provision

Felix Bierbrauer and Justus Winkelmann

Journal of Economic Theory, 2020, vol. 185, issue C

Abstract: We study public goods provision subject to ex post incentive and participation constraints. We also impose a requirement of anonymity. Different public goods can be bundled if sufficient resources are available. The analysis focuses on the all-or-nothing-mechanism: Expand provision as much as is resource feasible if no one vetoes - otherwise stick to the status quo. We show that the probability of the all-outcome converges to one as the capacity becomes unbounded. For a given finite capacity, we provide conditions under which the all-or-nothing-mechanism is ex ante welfare-maximizing - even though, ex post, it involves an overprovision of public goods.

Keywords: Public goods; Bundling; State capacity; Mechanism design (search for similar items in EconPapers)
JEL-codes: D79 D82 H41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:185:y:2020:i:c:s002205311930105x

DOI: 10.1016/j.jet.2019.104955

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