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

Matthew Kotchen

No 13643, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines voluntary provision of a public good that is motivated, in part, to compensate for other activities that diminish the public good. Markets for environmental offsets, such as those that promote carbon neutrality to minimize the impact of climate change, provide an increasingly salient example. An important result, related to one shown previously, is that mean donations to the public good do not converge to zero as the economy grows large. Other results are new and comparable to those from the standard model of a privately provided public good. The Nash equilibrium is solved explicitly to show how individual direct donations and net contributions depend on wealth and heterogenous preferences. Comparative static analysis demonstrates how the level of the public good and social welfare depend on the technology, individual wealth, and an initial level of the public good. Application of the model in an environmental context establishes a starting point for understanding and making predictions about markets such as those for carbon offsets.

JEL-codes: H0 H41 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-env, nep-pbe, nep-pub and nep-soc
Note: EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, 04.

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Journal Article: Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets (2009)
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