SALIENCE AND THE GOVERNMENT PROVISION OF PUBLIC GOODS

Matthew Wibbenmeyer, Sarah E. Anderson and Andrew J. Plantinga

Economic Inquiry, 2019, vol. 57, issue 3, 1547-1567

Abstract: This paper examines how behavioral biases caused by salient events affect the government provision of public goods. We develop a theory in which competing communities lobby the government for allocations of a local public good. Salient events bias community demands for the good, which results in inefficient allocations. We empirically test this theory using salient wildfires and government projects to reduce wildfire risk. Wildfires reduce risk to nearby communities, but may increase demand for fuels management projects because of biases induced by salient wildfires. We find that communities experiencing recent nearby fires are more likely to receive fuels management projects. (JEL D03, H41, Q24)

Date: 2019
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