Bequests and Cost-Benefit Analysis

Esko Niskanen, Amihai Glazer and Vesa Kanniainen

No 117, Discussion Papers from VATT Institute for Economic Research

Abstract: Consider a public project which produces a consumption good and which benefits future generations. Let a conventional cost-benefit analysis find that it gives higher benelits than projects it would displace in the private sector. Voters may nevertheless oppose the public project. The cause of the opposition arises from the absence of property rights and from the bequest motive of parents. Private projects have owners, allowing parents to control whether their children will receive the benefits from such projects. Parents can therefore pay for services from their children by giving them title to private projects. In contrast, public projects yield benefits to future generations independently of the care children give their parents.

Keywords: public project, bequests, property rights, cost-benefit analysis, Macroeconomic policy, Talouspolitiikka, Labor market and policies promoting economic growth, Työmarkkinat ja kasvua tukeva politiikka, D610 - Allocative Efficiency; Cost-Benefit Analysis (contingent valuation), E600 - Macroeconomic Policy Formation; Macroeconomic Aspects of Public Finance; Macroeconomic Policy; General Outlook: General, H500 - National Government Expenditures and Related Policies: General, (search for similar items in EconPapers)
Date: 1996
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Working Paper: Bequests and Cost-Benefit Analysis (1995)
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