Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets

Matthew J. Kotchen

Economic Journal, 2009, vol. 119, issue 537, 883-899

Abstract: This article examines voluntary provision of a public good that is motivated, in part, to compensate for activities that diminish the public good. Markets for environmental offsets, such as those that promote carbon neutrality, provide an increasingly salient example. An important result is that mean donations do not converge to zero as the economy grows large. The equilibrium is solved to show how direct donations and net contributions depend on wealth and heterogeneous preferences. Comparative static analysis demonstrates how public good provision and social welfare depend on the technology, individual wealth and an initial level of the public good.

Date: 2009
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https://doi.org/10.1111/j.1468-0297.2008.02215.x

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