On the (Sequential) Majority Choice of Public Good's Size and Location

Philippe De Donder, Michel Le Breton and Eugenio Peluso
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Michel Le Breton: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Eugenio Peluso: UNIVR - Università degli studi di Verona = University of Verona

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Abstract: This article studies majority voting over the size and location of a public good when voters differ both in income and in their preferences for the public good location. Public good provision is financed either by a lump sum tax or by a proportional income tax. We analyze both the simultaneous and the sequential determinations of the public good's size and location. We show that, while the choice of the type of public good follows the traditional median logic, the majoritarian determination of the taxation rate need not coincide with the preferences of a median income citizen. With lump sum financing, income heterogeneity plays no role and the sequential equilibrium consists of the median location together with the public good level most-preferred by the individual located at the median distance from the median. This policy bundle also constitutes an equilibrium with simultaneous voting in the special case of a uniform bivariate distribution of individuals' income and location. With proportional taxation, there is no policy equilibrium with simultaneous voting. We offer a complete characterization of the equations describing the sequential equilibrium in the general case and we show why and how our results depart from those most-preferred by the median income individual located at the median distance from the median. We also compare these majority voting allocations with the socially optimal one.

Date: 2012-03
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Published in Social Choice and Welfare, 2012, 39 (2), pp.457-489. ⟨10.1007/s00355-012-0656-4⟩

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Related works:
Journal Article: On the (sequential) majority choice of public good size and location (2012)
Working Paper: On the (Sequential) Majority Choice of Public Good Size and Location (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04927071

DOI: 10.1007/s00355-012-0656-4

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