A Case for Bundling Public Goods Contributions

25 Pages Posted: 11 Dec 2007

See all articles by Suman Ghosh

Suman Ghosh

Florida Atlantic University - Department of Economics

Alexander Karaivanov

Simon Fraser University (SFU) - Department of Economics

Mandar Oak

University of Adelaide - School of Economics

Date Written: 2006-06-26

Abstract

We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated toward the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-à-vis a separate contributions scheme. We show that for high income inequality or for identical preferences among agents bundling leads to higher joint welfare. Interestingly, a welfare improvement can in some cases occur despite a decrease in total contributions. On the contrary, when agents are heterogenous, for low income inequality bundling can lead to lower total contributions and may decrease welfare compared to a separate contribution scheme. Our findings have implications for the design of charitable institutions and international aid agencies.

Suggested Citation

Ghosh, Suman and Karaivanov, Alexander and Oak, Mandar, A Case for Bundling Public Goods Contributions (2006-06-26). Journal of Public Economic Theory, Vol. 9, Issue 3, pp. 425-449, June 2007. Available at SSRN: https://ssrn.com/abstract=1066066 or http://dx.doi.org/10.1111/j.1467-9779.2007.00313.x

Suman Ghosh (Contact Author)

Florida Atlantic University - Department of Economics ( email )

5353 Parkside Dr
Jupiter, FL 33458
United States

Alexander Karaivanov

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Mandar Oak

University of Adelaide - School of Economics

Adelaide SA, 5005
Australia

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