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Inefficient Public Provision in a Repeated Elections Model

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  • GEORGES CASAMATTA
  • CAROLINE DE PAOLI

Abstract

We consider a dynamic setting with no policy commitment. Two parties that compete for election must choose the level of provision of a public good as well as the tax payment needed to finance it. The cost of producing the good may be high or low and this information is not known to the voters. We show that there exists an equilibrium in which the party that does not want much of the public good uses the inefficient (high cost) technology even though the efficient one is available. Using the low cost technology would, by informing the voters about the cost parameter, force it to produce an excessively high level of the good in the future. Interestingly, this equilibrium is not symmetric, suggesting that a party with a strong taste for the public good is less likely to adopt a wasteful policy.

Suggested Citation

  • Georges Casamatta & Caroline De Paoli, 2007. "Inefficient Public Provision in a Repeated Elections Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(6), pages 1103-1126, December.
    • Handle: RePEc:bla:jpbect:v:9:y:2007:i:6:p:1103-1126
    DOI: 10.1111/j.1467-9779.2007.00332.x
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    Cited by:

    1. Martin Gregor & Dalibor Roháč, 2009. "The Optimal State Aid Control: No Control," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 093-113, March.
    2. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.

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