Standard economic analysis assumes the sets of public and private goods to be exogenously given. Yet societies very often choose the public-private mix, using resources to convert seemingly private goods into ones with public goods characteristics and vice versa. In practice, we see a bewilderingly large variety of public-private mixes across societies. This papers advances an analysis of the choice of the public-private mix in the framework of voluntary contributions to public goods provision, by envisaging that, starting from a situation where all goods have private characteristics, some goods can be changed to have public goods characteristics at a cost (by purchasing a "Samuelson machine"). It characterizes the jointly optimal choice of the public-private mix and the efficient supply or not of the public goods in the mix. This characterization generates a number of testable predictions on the public-private mix, and on the prevalence of free riding
Original language | English |
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Pages (from-to) | 1-11 |
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Number of pages | 11 |
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Journal | Economics Bulletin |
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Volume | 8 |
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Issue number | 13 |
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Publication status | Published - Dec 2006 |
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