Pareto Improving Interventions in a General Equilibrium Model with Private Provision of Public Goods

24 Pages Posted: 10 Oct 2006

See all articles by Antonio Villanacci

Antonio Villanacci

University of Florence

Ünal Zenginobuz

Bogazici University - Department of Economics; Bogazici University - Center for Economic Design (CED)

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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

JEL Classification: D51, H41

Suggested Citation

Villanacci, Antonio and Zenginobuz, Ünal, Pareto Improving Interventions in a General Equilibrium Model with Private Provision of Public Goods. Review of Economic Design, Forthcoming, Available at SSRN: https://ssrn.com/abstract=936191

Antonio Villanacci

University of Florence ( email )

Piazza di San Marco, 4
Florence, 50121
Italy
(055) 4223944 (Fax)

Ünal Zenginobuz (Contact Author)

Bogazici University - Department of Economics ( email )

Bebek
Istanbul, TR 34342
Turkey
+90 212 359 65 05 (Phone)
+90 212 287 24 53 (Fax)

HOME PAGE: http://www.econ.boun.edu.tr/zobuz

Bogazici University - Center for Economic Design (CED) ( email )

Bogazici University
P.K. 2 Bebek
Istanbul, 34342
Turkey
+90 212 287 24 76 (Phone)
+90 212 287 24 53 (Fax)

HOME PAGE: http://www.ced.boun.edu.tr

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