Private Provision of Public Goods: Incentives for Donations

Karen Pittel and Dirk Rübbelke

No 04/34, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In many countries the government supports individuals' and companies' donations dedicated to charity organizations or { more general { to public goods. Yet the effects of governmental support with respect to the provision of public goods has been and still is subject to an extensive debate in the economic literature. Starting from Warr's (1982, 1983) famous neutrality result an array of conditions has been identified under which this result holds or not. In this paper we examine the commonly used policy approach to subsi- dize the private provision of public goods by granting agents deductions with respect to their income or corporate tax burden. We especially take into ac- count that most income tax schemes are progressive and that deductibility is limited. The problems that arise from these specific properties of the con- sidered tax-refund schemes are pointed out first. We then turn towards the effects which such a tax-refund scheme has with respect to the provision of the public good on the one hand and individual as well as aggregate wel- fare on the other hand. We show that the effects of this commonly practised method of supporting private public good provision depend crucially on the specific properties of the progressive tax scheme and the preference structure of agents. While Pareto-improvements and even Pareto-efficiency can result from the implementation of such a scheme, it is also conceivable that at least some agents perceive a utility reduction. Due to the dependency of welfare effects on the tariff structure, income tax reforms as they are planned in many countries might not only induce a reduction in private public good provision, but might also alter the induced welfare effects.

Keywords: public goods; sponsoring; neutrality (search for similar items in EconPapers)
JEL-codes: H23 H42 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2004-08
New Economics Papers: this item is included in nep-exp, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.cer.ethz.ch/research/wp_04_34.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not found UA (http://www.cer.ethz.ch/research/wp_04_34.pdf [301 Moved Permanently]--> https://www.cer.ethz.ch/research/wp_04_34.pdf [301 Moved Permanently]--> https://cer.ethz.ch/research/wp_04_34.pdf)

Related works:
Journal Article: Private provision of public goods: incentives for donations (2006)
Working Paper: Private provision of public goods: Incentives for donations (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:04-34

Access Statistics for this paper

More papers in CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich Contact information at EDIRC.
Bibliographic data for series maintained by ().