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Privately provided public goods in a dynamic economy

Author

Listed:
  • Laura Marsiliani

    (Durham Business School)

  • Thomas I. Renstroem

    (Durham Business School)

Abstract

We show that when individuals can save (accumulate capital), they all eventually become public-good contributors. In steady state, larger economies have more contributors. If the public good is normal, then its quantity increases in population size in the open-loop equilibrium, but not necessarily in the feedback equilibrium. If both private and public goods are normal, then the open-loop equilibrium exhibits greater steady-state public provision than the feedback equilibrium. If private consumption is inferior the opposite is true. Interpreting individuals as countries, our findings suggest that all countries over time will become contributors toward a global public good.

Suggested Citation

  • Laura Marsiliani & Thomas I. Renstroem, 2010. "Privately provided public goods in a dynamic economy," Working Papers 2010_02, Durham University Business School.
    • Handle: RePEc:dur:durham:2010_02
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    File URL: http://dro.dur.ac.uk/10356
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    References listed on IDEAS

    as
    1. Fershtman, Chaim & Nitzan, Shmuel, 1991. "Dynamic voluntary provision of public goods," European Economic Review, Elsevier, vol. 35(5), pages 1057-1067, July.
    2. Itaya, Jun-ichi & Shimomura, Koji, 2001. "A dynamic conjectural variations model in the private provision of public goods: a differential game approach," Journal of Public Economics, Elsevier, vol. 81(1), pages 153-172, July.
    3. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, October.
    4. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    5. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    6. Gerhard Glomm & Roger Lagunoff, 1999. "A Dynamic Tiebout Theory of Voluntary vs. Involuntary Provision of Public Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 659-677.
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    Cited by:

    1. Han Jiang & Aggey Simons, 2021. "Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy," Working Papers 2113E Classification-H41., University of Ottawa, Department of Economics.

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    More about this item

    Keywords

    private provision; public goods; dynamic; intertemporal; differential game;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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