Social Status Concerns and the Political Economy of Publicly Provided Private Goods

69 Pages Posted: 28 Oct 2019

See all articles by Jana Friedrichsen

Jana Friedrichsen

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Tobias König

WZB Berlin Social Science Center

Tobias Lausen

Leibniz Universität Hannover

Date Written: October 2019

Abstract

We analyze the political economy of the public provision of private goods when individuals care about their social status. Status concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets: a higher provision level attracts more individuals to the public sector, enhancing the social exclusivity of market purchases. Majority voting may lead to a public provision that only a minority of citizens use. Users in the public sector 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: H42, D72

Suggested Citation

Friedrichsen, Jana and König, Tobias and Lausen, Tobias, Social Status Concerns and the Political Economy of Publicly Provided Private Goods (October 2019). DIW Berlin Discussion Paper No. 1824 (2019). Available at SSRN: https://ssrn.com/abstract=3476533 or http://dx.doi.org/10.2139/ssrn.3476533

Jana Friedrichsen (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

Tobias König

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Tobias Lausen

Leibniz Universität Hannover ( email )

Welfengarten 1
D-30167 Hannover, 30167
Germany

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