Volatility and Resilience of Democratic Public-Good Provision

Hans Gersbach, Fikri Pitsuwan (fp67@cornell.edu) and Giovanni Valvassori Bolgè

No 11004, CESifo Working Paper Series from CESifo

Abstract: We examine democratic public-good provision with heterogeneous legislators. Decisions are taken by majority rule and an agenda-setter proposes a level of the public good, taxes, and subsidies. Members are heterogeneous with respect to their benefits from the public good. We find that, depending on the status quo public-good level, the agenda-setter will form a coalition with the agents who most desire, or least desire, the public good, and we may observe ‘strange bedfellow’ coalitions. Moreover, public-good provision is a non-monotonic function of the status quo public-good level. In the dynamic setting, public-good provision fluctuates endogenously, even if the agenda-setter stays the same over time. Moreover, the more polarized the legislature is, the higher is the volatility of public-good provision and the longer it may take for a society to recover from negative shocks to public-good provision. We illustrate these findings for a two-party system with polarized parties.

Keywords: legislative bargaining; coalition; public goods; polarization; resilience (search for similar items in EconPapers)
JEL-codes: C73 D72 H50 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic, nep-pol and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11004

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