On Financing Global and International Public Goods
51 Pages Posted: 20 Apr 2016
Date Written: July 17, 2001
July 2001 Not all international public goods (IPGs) pose the same financial challenges. For some, encouraging adequate funding requires much ingenuity. For still other IPGs, incentives are consistent with the operation of markets or clubs; no official intervention is required as the IPGs are financed unofficially, with few transaction costs.
Three dimensions of public goods - nonrivalry of benefits, the possibility of being excluded from benefits, and the technology for aggregating public supply - determine what kinds of institutions and transnational actions are required for their provision and financing. For some public goods - especially those for which the exclusion of nonpayers is not feasible - these properties are such that a public sector push is needed or the good will not be financed. This push can come from a supranational structure (such as the World Bank, the United Nations, or the European Union) that directly or indirectly collects the requisite fees from its members to underwrite international public goods (IPGs).
To understand the role of international institutions in promoting IPGs, one must ascertain the nature of the good and whether it requires a push, a coax, or no assistance from a supranational structure or influential nation(s) and agents (such as charitable foundations).
The transnational community should explicitly direct scarce resources only to those global and international public goods that need either a significant push or only a smaller coax by the transnational community. When clubs or markets can finance international public goods, the community should sit back and let incentives guide the actions of sovereign nations.
This paper - a product of the Economic Policy and Prospects Group - is part of a larger effort in the group to analyze the financing requirements for international public goods. The author may be contacted at email@example.com.
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