Image Concerns and the Political Economy of Publicly Provided Private Goods

42 Pages Posted: 16 Feb 2017

See all articles by Tobias König

Tobias König

University of Hannover

Tobias Lausen

Leibniz Universität Hannover

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Date Written: January 24, 2017

Abstract

Governments often provide their citizens with goods and services that are also supplied in markets: education, housing, nutritional assistance, etc. We analyze the political economy of the public provision of private goods when individuals care about their social image. We show that image concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets, the reason being that a higher provision level attracts more individuals to the public system, enhancing the social exclusivity of market purchases. In effect, majority voting may lead to a public provision that only a minority of citizens use. Users in the public system may enjoy better provision than users in the private system. We characterize the coalitions that can prevail in a political equilibrium.

Keywords: In-Kind Provision, Status Preferences, Majority Voting

JEL Classification: H420, D720

Suggested Citation

König, Tobias and Lausen, Tobias and Wagener, Andreas, Image Concerns and the Political Economy of Publicly Provided Private Goods (January 24, 2017). CESifo Working Paper Series No. 6304, Available at SSRN: https://ssrn.com/abstract=2918724

Tobias König

University of Hannover ( email )

Koenigsworther Platz 1
30167 Hannover, DE 30167
Germany

Tobias Lausen

Leibniz Universität Hannover ( email )

Welfengarten 1
D-30167 Hannover, 30167
Germany

Andreas Wagener (Contact Author)

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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