The private provision of public goods via dominant assurance contracts

Many types of public goods can be produced privately by profit seeking entrepreneurs using a modified form of assurance contract, called a dominant assurance contract. I model the dominant assurance contract as a game and show that the pure strategy equilibrium has agents contributing to the public good as a dominant strategy. The game is also modelled under incomplete information as a Bayesian-Nash game.     

Private provision of public goods can be efficient

Economists have long believed that private provision of public goods will be inefficient, though recently some have argued that altruism may mitigate the inefficiencies. Without altruism, agents contribute to the point where marginal cost equals their private marginal benefits. With altruism, they contribute more and hence are closer to the point where marginal cost and total marginal benefits are equated. In an earlier paper (Bagnoli and Lipman, 1989), we showed that private provision need not be inefficient. In a very natural model of private provision without altruism, we showed that the set of (undominated perfect) equilibrium outcomes is identical to the core. Here we consider the effect of altruism on private provision. Altruism essentially creates more public goods because the well-being of others becomes a public good. We show that our model of private provision still has efficient equilibria under a wide variety of circumstances. Interestingly, the equilibria may be inefficient when agents are concerned about the effect of private provision on the distribution of wealth. Intuitively, the game we consider is a very powerful instrument for efficient private provision, but must be supported by other instruments if the set of public goods is expanded too far.We wish to thank Jim Andreoni, Ted Bergstrom, and an anonymous referee for helpful comments and to acknowledge financial support from the National Science Foundation through NSF Grant SES-8520296. Of course, any remaining errors are our responsibility.     

Innovations in the provision of public goods and services

Current efforts at administrative reform in both developed and developing countries have invariably focused on the critical issue of provision of public goods and services. The accumulated experience and attendant innovations are therefore vast. Few attempts have been made to pull this experience together and draw salient features which might be of use to newcomers to the task of improving provision of public goods and services. This article draws on a panel of experts and government officials convened by the author who have reflected and/or experimented with innovative approaches to public good and service provision. After discussing the role of the state, market and civil society relative to public goods and services, the article lays out a set of basic institutional options for innovations in provision. The article concludes with some strategic considerations on the sequencing of steps to achieve successful market-based innovations in the provision of public goods and services in the context of the minimalist and the strong but restrained state. © 1998 John Wiley & Sons, Ltd.     

Bureaucratic choice and nonoptimal provision of public goods: Theory and evidence

Local governments' allocation decisions are modeled in the context of a slack maximizing bureaucrat who produces public goods according to a production function that includes both provision and the constituents' socio-economic characteristics. To gain a better understanding of the determinants of slack, comparative statics and an empirical study of Illinois municipalities are conducted. The indirect output distance function provides efficiency scores upon which we regress several variables, representing socio-economic characteristics, costs and competition measures. We find that slack or inefficient behavior is associated with richer communities, lower education levels and a lack of competition for residents among municipalities.     

The voluntary provision of a pure public good with diminishing marginal returns

In experiments investigating the voluntary provision of a pure public good, participants consistently allocate resources to this good when the Nash prediction is to allocate nothing. This paper explores the robustness of this result when the Nash prediction calls for a division of resources between the private and public goods. We consider how a change in individual resource endowments and supplemental earnings information affect allocations to the public good. Results indicate that, under both the high and low endowment conditions, groups continue to allocate more resources than the Nash prediction. However, providing participants with detailed instructions that describe the declining marginal benefit to the public good leads to a significant decrease in allocations to the public good.     

Heterogenous demand for public goods: Behavior in the voluntary contributions mechanism

Numerous laboratory experiments have investigated the performance of several processes for providing public goods through voluntary contributions. This research has been able to identify features of the institution or environment which are reliably likely to produce outcomes “close” to the free riding outcome or “substantially” greater than the pessimistic prediction of standard models. One such feature is the “marginal per-capita return” (MPCR) from the public good. Various authors have altered MPCR between groups or for an entire group at the same time. The experiments reported here address a different question, “What would happen if, within a group, some persons faced a ‘high’ MPCR while others faced a ‘low’ MPCR?”     

Efficiency in the provision of pure public goods by private citizens

This paper raises an old question and proposes a new answer. The question is, “Must public goods be produced by governments?” The consensus answer is “Yes,” on the grounds that transaction costs related to group size prevent all potential consumers of a public good from entering into voluntary arrangements to produce efficient levels of that good. Government intervention thus is required to achieve efficiency. Yet many obvious examples of public goods are not financed or even subsidized by government. Conspicuous examples of this phenomenon include the development of important innovations in technique in fields such as music (Bach and Beethoven), literature (Defoe, Dickens and Shakespeare, not excepting Homer or Adam Smith), and the visual arts (Cezanne), not to mention many crucial scientific discoveries. Indeed, the obvious public-good aspects of scientific knowledge induced many private societies to offer prizes for particular innovations. Two questions are raised by the private, voluntary provision of nonrival outputs or inputs: (1) what conditions contribute to this phenomenon, and (2) can voluntary provision come “close” to efficient provision? We suggest in this paper that, under certain conditions, the gains from many public goods whose benefits reach nationwide populations are largely realized at group sizes far smaller than even county or municipal jurisdictions.     

论中国县级政府在公共物品提供中的职能定位

中国政府职能划分普遍存在“职责同构”现象,地方政府与中央政府在公共物品提供上存在职责不清现象。作为与居民联系最密切的县级政府,在职能划分上存在诸多困境。本文在分析了中国县级政府的职能困境和比较国外县级政府在公共物品提供方面的经验作法後,提出了县级政府在公共物品的供给土应准确进行职能定位。     

Self-enforcing norms and efficient non-cooperative collective action in the provision of public goods

We show how norms can solve the distributional conflict inside a group in an anarchic environment and yield efficient coordination of collective action in a conflict with an external competitor. The equilibrium of the fully non-cooperative game with finite horizon has two interesting features. First, one of the players assumes a central role that resembles the role of the ??big-man?? in some primitive stateless societies. Second, the group members?? contributions to collective output and the payments from the big-man to these members seemingly look like reciprocal behavior, even though they are driven by narrowly selfish preferences.     

Free riders or easy riders?: An examination of the voluntary provision of public radio

This paper tests the widely accepted hypothesis that when a pure public good is voluntarily provided incentives to free ride increase with the number of individuals consuming the good. Specifically, I use unique data on the number of listeners and contributors to public radio to test two hypotheses. First I test whether the proportion of contributors falls as group size increases and second I test whether contributions per contributor falls as group size increases. I find that increases in group size result in significantly more free riding. However, I also find that group size has no effect on contributions per contributor.     

The life satisfaction approach to valuing public goods: The case of terrorism

Terrorism has large social costs that are difficult to quantify for the well-known problems of eliciting people’s preferences for public goods. We use the LSA to assess these costs in utility and monetary terms. Based on combined cross-section time-series data, we estimate the costs of terrorism for France and the British Isles. We find large negative effects of terrorism on life satisfaction that translate into considerable compensating surpluses for a hypothetical reduction in terrorism, in particular for the serious conflict in Northern Ireland. The effects of terrorism are robust and differ across groups in accordance with prior expectations.     

Fresh pipes with dirty water: How quality of government shapes the provision of public goods in democracies

A large strand of research holds that democracy with its broad representation and electoral accountability is beneficial for the provision of public goods. Yet, there is a large variation in how democracies perform, indicating that democratic institutions alone do not suffice for securing citizens’ wellbeing. Recent studies have stressed the equal importance of state capacity for public goods delivery. These studies, however, rarely investigate how the lack of state capacity mutes the effects of democratic institutions on public goods provision. This article addresses this gap by using a mixed methods design. First, the conditional effects of democracy and quality of government (QoG) are tested on the previously under-researched domain of the provision of clean water. The results show that democracy is associated with higher water quality only in countries where QoG is high. If QoG is low, more democracy is even related to lower water quality. The second stage of the analysis proceeds by examining how poor QoG disrupts the effects of democracy on public access to safe drinking water using interview data from a typical case of Moldova. The analysis illustrates that democracy has a number of positive effects and incentivises politicians to focus on the visible aspects of water provision, including the expansion of the water pipe network. However, low QoG hampers adoption and implementation of long-term policies necessary for securing an aspect of water provision that is harder to achieve – namely water quality. This leaves the fresh pipes with dirty water.