On the Neutrality of Redistribution in a General Equilibrium Model with Public Goods
Posted: 10 Oct 2006
Models on private provision of public goods typically involve a single private good and linear production technology for the public good. We study a model with several private goods and non-linear (strictly concave) production technology. We revisit the question of "neutrality" of government interventions on equilibrium outcomes and show that relative price effects that are absent with a single private good and linear production technology become a powerful channel of redistribution in this case. Contrary to previous results, redistributing endowments in favor of contributors is shown to be neither necessary nor sufficient for increasing the equilibrium level of public good.
Keywords: public goods, private provision, neutrality results, general equilibrium
JEL Classification: D51, H41
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