Inefficient Public Provision in a Repeated Elections Model

24 Pages Posted: 11 Dec 2007

See all articles by Georges Casamatta

Georges Casamatta

Toulouse School of Economics (GREMAQ-CNRS); Centre for Economic Policy Research (CEPR)

Caroline De Paoli

University of Toulouse 1 - Manufacture des Tabacs; École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA)

Date Written: 2006-07-06

Abstract

We consider a dynamic setting with no policy commitment. Two parties that compete for election must choose the level of provision of a public good as well as the tax payment needed to finance it. The cost of producing the good may be high or low and this information is not known to the voters. We show that there exists an equilibrium in which the party that does not want much of the public good uses the inefficient (high cost) technology even though the efficient one is available. Using the low cost technology would, by informing the voters about the cost parameter, force it to produce an excessively high level of the good in the future. Interestingly, this equilibrium is not symmetric, suggesting that a party with a strong taste for the public good is less likely to adopt a wasteful policy.

Suggested Citation

Casamatta, Georges and De Paoli, Caroline, Inefficient Public Provision in a Repeated Elections Model (2006-07-06). Journal of Public Economic Theory, Vol. 9, Issue 6, pp. 1103-1126, December 2007. Available at SSRN: https://ssrn.com/abstract=1067129 or http://dx.doi.org/10.1111/j.1467-9779.2007.00332.x

Georges Casamatta (Contact Author)

Toulouse School of Economics (GREMAQ-CNRS) ( email )

Manufacture des Tabacs (bât. F)
21 Allee de Brienne
31000 Toulouse
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Caroline De Paoli

University of Toulouse 1 - Manufacture des Tabacs ( email )

21, allée de Brienne
Toulouse, 31000
France

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

48 boulevard Jourdan
75014 Paris
France

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