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When should the government own the physical assets needed to provide public goods?

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  • Schmitz, Patrick W.

Abstract

Consider a government and a non-governmental organization (NGO) who can collaborate to provide a public good using physical assets. Who should be the owner of the assets if the NGO can make non-contractible investments? In the literature it has been argued that whoever has a larger valuation of the public good should be the owner. Yet, this result was derived under the assumption of symmetric information. We study the case in which the NGO gets privately informed about the quality of the public good. It turns out that public ownership becomes more attractive if the probability of a high quality is relatively small, whereas ownership by the NGO becomes more attractive otherwise.

Suggested Citation

  • Schmitz, Patrick W., 2024. "When should the government own the physical assets needed to provide public goods?," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524003148
    DOI: 10.1016/j.econlet.2024.111830
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    References listed on IDEAS

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    1. Schmitz, Patrick W., 2013. "Incomplete contracts and optimal ownership of public goods," Economics Letters, Elsevier, vol. 118(1), pages 94-96.
    2. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).
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    9. Schmitz, Patrick W., 2021. "Optimal ownership of public goods under asymmetric information," Journal of Public Economics, Elsevier, vol. 198(C).
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    More about this item

    Keywords

    Public goods; Property rights; Investment incentives; Asset ownership; Incomplete contracts;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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