ISBN: 3540241744
TITLE: Public Goods
AUTHOR: Batina/Ihori
TOC: 

1 Introduction 1
1.1 A Classification 2
1.2 Summary of the Book 4
1.3 New Areas 8
1.4 A Last Word 8
2 First-Best Public Provision of Pure Public Goods 9
2.1 Efficient Provision of a Pure Public Good 10
2.1.1 Samuelson's Classic Rule for Providing a Pure Public Good 10
2.1.2 The Lindahl Financing Mechanism 13
2.1.3 The Free Rider Incentive Problem 14
2.2 Examples 17
2.2.1 A Static Model with Labor 17
2.2.2 Heterogeneity 18
2.2.3 A Simple Dynamic Model 19
2.2.4 Public Goods in an Overlapping Generations Economy 20
2.3 Financing Public Goods 21
2.3.1 First-Best Decentralization: Person-Specific Taxes 22
2.3.2 Non Person-Speck Taxes 23
2.3.3 Pre-Existing Distortions 24
2.3.4 The Economy's Expansion Path 24
2.4 Conclusion 26
Appendix: Lump Sum Taxes 27
3 Second-Best Public Provision of Pure Public Goods 29
3.1 Second-Best Provision: Distorting Commodity Taxation 30
3.2 Extensions 34
3.2.1 Heterogeneity in the Second-Best: Commodity Taxation 34
3.2.2 A Reform Analysis 35
3.2.3 Labor Income Taxes 36
3.3 Level Comparisons 38
3.3.1 Identical Agents 38
3.3.2 Alternative Formulation 39
3.4 Public Goods in the Overlapping Generations Model 40
3.4.1 The Optimal Second-Best Rule 40
3.4.2 Level Comparisons 42
3.4.3 Self-Selection and Heterogeneity 43
3.5 The Marginal Cost of Funds (MCF) 43
3.5.1 Labor Income Taxation and the MCF 44
3.5.2 Capital Income Taxation and the Marginal Cost of Funds 45
3.5.3 Empirical Calculations of the MCF 46
3.6 Conclusion 47
Appendix A: Samuelson's Rule in the Static Model with Heterogeneity 48
Appendix B: A Reform Analysis 48 Appendix C: Labor Income Taxation 49
Appendix D: Samuelson's Rule in the OG Model 49
4 Determining Demand for Public Goods:
Voting and Mechanisms 53
4.1 Voting Models 54
4.1.1 The Median Voter Hypothesis 54
4.1.2 Problems With the Median Voter Hypothesis 57
4.1.3 Extensions of the Median Voter Model 61
4.2 Mechanism Design with Public Goods 62
4.2.1 The Clarke Mechanism 62
4.2.2 The Groves - Ledyard Mechanism 66
4.2.3 Multi-Stage Games 68
4.2.4 Problems with Mechanism Design 69
4.2.5 Mechanisms and Social Weighting 72
4.3 Conclusion 73
5 Determining the Demand for Public Goods:
Surveys and Indirect Estimation 77
5.1 Bohm's Survey 77
5.2 Contingent Valuation (CV) 79
5.2.1 The Basic Method 79
5.2.2 Common Problems 81
5.2.3 An Example of Contingent Valuation: Valuing Commuting Time 81
5.2.4 A Unified Approach to Contingent Valuation 82
5.3 A Critique of the Contingent Valuation Approach 84
5.4 Indirect Estimation: Weak Complementarity (WC) 87
5.4.1 The Basic Method 87
5.4.2 Problems 91
5.4.3 Indirect Estimation as a Mechanism 92
5.5 Conclusion 93
6 Privately Provided Public Goods 99
6.1 The Subscriptions Model 101
6.2 The Warm Glow Model 104
6.3 Criticism of the Models 106
6.4 Imperfect Altruism Models 108
6.5 Hybrid Models 110
6.6 Fundraising Costs 112
6.7 Conclusion 113
7 Extensions 115
7.1 Charities 116
7.1.1 Fundraising Under Competition 116
7.1.2 Status Effects and Charities 118
7.1.3 Seed Money 121
7.2 Sequential Contributions and Strategic Behavior 122
7.2.1 A Two Period Model 122
7.2.2 Warm Glow Giving 124
7.2.3 Mechanisms 126
7.3 A Simple Dynamic Model of a Privately Provided  Public Good 129
7.3.1 Privately Provided Public Goods in the OG Model 129
7.3.2 Optimality of Donations in the OG Model 132
7.4 Conclusion 133
8 Neutrality Results 135
8.1 Neutrality Propositions 136
8.1.1 Redistribution 136
8.1.2 Supplemental Government Provision 137
8.2 The Failure of Neutrality 138
8.2.1 Non-Neutrality: Non-Participants 138
8.2.2 Differences in Marginal Cost 138
8.2.3 Imperfect Altruism: Contributions as Imperfect Substitutes 139
8.2,4 Imperfect Altruism: The Warm Glow Model 140
8.2.5 Distorting Taxes and Transfers 141
8.2.6 Sophisticated and Unsophisticated Agents 145
8.2.7 Local Market Power Versus National Policies 146
8.2.8 Fundraising 148
8.3 Neutrality and Donated Labor 148
8.3.1 Donated Labor 148
8.3.2 Donated Labor and Cash Contributions 149
8.4 Conclusion 150
Appendix A: Neutrality Results 151
Appendix B: Non-Neutrality Results 151
9 Empirical Evidence an Charitable Contributions 155
9.1 Empirical Research an Charity 156
9.1.1 Econometric Problems 156
9.1.2 Data Sources 158
9.2 Static Models 159
9.2.1 Modelling Contributions in a Static Models 159
9.2.2 Empirical Results 161
9.3 Dynamic Models 168
9.3.1 Modeling Contributions in a Dynamic Model 168
9.3.2 Empirical Results 172
9.4 Conclusion 177
10 Further Evidence an Privately Provided Public Goods 181
10.1 Volunteer Labor 182
10.1.1 Modeling Volunteer Labor 182
10.1.2 Evidence 184
10.2 Charitable Bequests 189
10.2.1 Modeling Charitable Bequests 189
10.2.2 Empirical Results 191
10.3 Testing for Externalities and the Crowding Out Hypothesis 193
10.4 Conclusion 202
11 Experimental Evidence an the Free Rider Problem 205
11.1 How Are Experiments Designed? 206
11.2 Early Studies of the Free Rider Hypothesis 208
11.3 An Early Response to the Early Results 211
11.4 Underlying Influences 214
11.4.1 Marginal Returns 214
11.4.2 Group Size Effects 215
11.4.3 Communication 215
11.4.4 Learning 216
11.5 Altruism, Warm Glow, or Noise? 218
11.5.1 Separating Kindness from Confusion 219
11.5.2 Altruism, Warm Glow, or Noise? 221
11.5.3 Revealed Preference and Altruism 224
11.6 Framing 225
11.7 Eliciting the WTP Function 227
11.8 Conclusion 228
12 The Effect of Public Inputs an the Economy in Static Models 233
12.1 The Effect of Public Capital an the Firm 234
12.2 A Static Open Economy Model of Public Inputs 235
12.3 Optimal Provision of a Public Input in the Small Open Economy 238
12.4 A Generalization 240
12.5 A General Equilibrium Model of Public Infrastructure 241
12.6 A Model with Rents 243
12.7 Conclusion 245
Appendix A: Comparative Statics in the Static, General Equilibrium Model 246 Appendix B: Derivation of (12.10) when n < m 248
Appendix C: Derivation of (12.11) 248
13 The Effects of Public Capital in Dynamic Models 251
13.1 Production Efficiency 253
13.1.1 The Basic Result an Production Efficiency 253
13.1.2 Imperfect Control 254
13.1.3 Heterogeneity 255
13.2 Public Investment in the Overlapping Generations Model 256
13.2.1 Socially Optimal Public Investment in the Neoclassical OG Model 257
13.2.2 Decentralized Government Policy 258
13.3 Public Investment in a Model of Long Run Growth 261
13.3.1 Public Capital as a Source of Economic Growth 261
13.3.2 Congestion 265
13.4 Conclusion 267
Appendix A: Derivation of the Weighted Average Formula (13.3) 267
Appendix B: The Weighted Average Formula with Heterogeneity 268
Appendix C: Endogenous Growth and Congestion - The Planner's Problem 269
14 Empirical Work an the Public Capital Hypothesis 271
14.1 Early Results 272
14.2 Criticism of the Early Work 275
14.3 Studies Using Disaggregated U.S. Data 276
14.3.1 Regional and State Studies 276
14.3.2 Industry Studies 282
14.4 Additional Time Series Evidence 283
14.5 International Evidence 286
14.6 Optimality 292
14.7 Conclusion 295
15 Local Public Goods, Club Goods, and the Tiebout Hypothesis 299
15.1 Club Goods 300
15.1.1 The Benchmark Club Good Model 300
15.1.2 Endogenous Classification 304
15.1.3 Intensity of Use 305
15.1.4 Quality Versus Quantity 306
15.1.5 Optimal Sorting with Heterogeneous Agents 307
15.2 Local Public Goods and the Tiebout Hypothesis 310
15.2.1 A Model of an LPG 311
15.2.2 A Model with Housing 312
15.2.3 Property Taxation 315
15.2.4 Tiebout Without Political Institutions 318
15.3 Criticism of the Tiebout Hypothesis 320
15.4 Conclusion 322
16 Fiscal Competition 327
16.1 Tax Competition 328
16.1.1 Taxing Mobile Capital 330
16.1.2 Productive Public Investments 332
16.1.3 Tax Exporting and Commodity Tax Competition 334
16.1.4 Bidding for the Tax Base 335
16.1.5 Tiebout and Tax Competition 336
16.2 Extensions 338
16.2.1 Composition of Spending 338
16.2.2 Residence-Based Capital Income Taxes 339
16.2.3 The Time Consistency of Tax Policy 340
16.3 Imperfect Mobility 342
16.4 Fiscal Federalism 345
16.4.1 Mobility and Pareto Optimality 345
16.4.2 Vertical Fiscal Competition 347
16.5 Conclusion 349 Appendix 350
17 Empirical Testing with Local Public Goods 353
17.1 Testing the Tiebout Hypothesis 354
17.1.1 A Model of Capitalization 354
17.1.2 Testing the Capitalization Hypothesis 356
17.1.3 Testing Leviathan 357
17.2 Estimating the Demand for LPGs: Politics and the Tiebout Hypothesis 358
17.3 Strategic Government Behavior 362
17.3.1 Models of Government Interaction 362
17.3.2 An Example: Horizontal Tax Competition 365
17.3.3 An Example: Vertical Tax Competition 365
17.3.4 Some Empirical Results 366
17.4 Conclusion 368
References 371
Index 407
Author Index 415
END
