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Optimal public policy and endogenous preferences: an application to an economy with for-profit and non-profit enterprises

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  • Luigi Bonatti

Abstract

We present a general equilibrium model where profit-maximizing firms and non-profit organizations coexist, and the people�s propensity to devote efforts to non-profit activities increases with the stock of social capital. In its turn, the formation of social capital is stimulated by an increase in the aggregate volume of non-profit activities. Therefore, a public policy subsidizing the nonprofits has an indirect effect on people�s preferences concerning the effort to devote to these organizations via its positive impact on the accumulation of social capital. Within this framework, we analyze the optimal policies of a government facing myopic or rational agents.

Suggested Citation

  • Luigi Bonatti, 2007. "Optimal public policy and endogenous preferences: an application to an economy with for-profit and non-profit enterprises," Department of Economics Working Papers 0713, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpde:0713
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    Keywords

    Myopic behavior; Work effort; Social capital; Altruism; Third sector.;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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