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Abstract:
We analyze a general
equilibrium model of a completely decen-tralized pure
public good economy. Competitive …rms using private goods
as inputs produce the public good, which is privately provided
by households. Previous studies on
private provision of public goods typically
use one private good, one public good models in which the
public good is produced through a
constant returns to scale technol-ogy. Two
distinguishing features of our model are the presence of several
private goods and non-linear,
in fact strictly concave, produc-tion technology
for the public good.
In this more general framework we revisit the question of ”neu-trality”
- or non-e¤ectiveness - of
government interventions on private provision
equilibrium outcomes. We con…rm the well-known neutral-ity
results when all households are
contributing to the provision of the
public goods and the non-neutrality results when there are some
non-contributing households. We also
show that relative price e¤ects, which
are absent with a single private good and under constant re-turns
to scale technology for public good
production, come to play an important
role and generate new non-neutrality results. Specially, if the
number of private goods is greater than one, typically there ex-ists
a redistribution of endowments of
the private good among non-contributors
which increases the total supply of
public good. More importantly,
if a condition involving the number of households and private
goods holds, typically there exists a choice of taxes on rms
that Pareto improves upon the
equilibrium outcome. Therefore, a
general non-neutrality result (in
terms of utilities) holds even if allhouseholds are contributors. |
