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Pareto improving interventions in a general equilibrium model with private provision of public goods

Antonio Villanacci () and Ünal Zenginobuz ()

MPRA Paper from University Library of Munich, Germany

Abstract: Most of the literature on government intervention in models of voluntary public goods supply focuses on interventions that increase the total level of a public good, which is considered to be typically underprovided. However, an intervention that is successful in increasing the public good level need not benefit everyone. In this paper we take a direct approach to welfare properties of voluntary provision equilibria in a full blown general equilibrium model with public goods and study interventions that have the goal of Pareto improving on the voluntary provision outcome. Towards this end, we study a model with many private goods and nonlinear production technology for the public good, and hence allow for relative price effects to serve as a powerful channel of intervention. In this setup we show that Pareto improving interventions generally do exist. In particular, direct government provision financed by “small”, or “local”, lump-sum taxes can be used generically to Pareto improve upon the voluntary provision outcome.

Keywords: general equilibrium; private provision of public goods; Pareto improving interventions (search for similar items in EconPapers)
JEL-codes: D51 H41 (search for similar items in EconPapers)
Date: 2004-12-15, Revised 2006-06-07
New Economics Papers: this item is included in nep-mic and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

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Journal Article: Pareto improving interventions in a general equilibrium model with private provision of public goods (2006) Downloads
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