Private provision of public good and immiserizing growth

Debasis Mondal

Social Choice and Welfare, 2015, vol. 45, issue 1, 29-49

Abstract: This paper develops a simple R&D driven endogenous growth model with a public good financed by private contributions. I show that a larger endowment of population or resources can be immiserizing for the economy as a whole. With a larger population, the economy grows at a higher rate but per-capita income from asset holdings falls unambiguously. Since people voluntarily contribute a part of their instantaneous income toward the public good, reduced asset income may lead to lower level of provision of the public good. This brings in the possibility of immiserizing growth where higher rate of growth is associated with lower level of welfare. I also show that the socially optimum level of public good provision may well fall below the equilibrium level and that the problem of underprovision of the public good need not be aggravated in larger economies. Copyright Springer-Verlag Berlin Heidelberg 2015

Date: 2015
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DOI: 10.1007/s00355-014-0842-7

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