Monopolistic Competition, Growth, and Public Good Provision
U of Alabama Economics, Finance and Legal Studies Working Paper No. 06-10-02
20 Pages Posted: 11 Jan 2007
Date Written: October 2006
In the standard model, provision of a pure public good is increasing in group size if it is a normal good. I develop a model of public good provision in which private goods are supplied in a monopolistically competitive market. In this context, increases in the size of the group are increases in the population of a society. I find that increases in population lead to reduced public good provision. The reason is quite simple: As population increases, the number of private goods available for consumption also increases. This raises the marginal utility of income and increases the opportunity cost of contributing to the public good.
Keywords: Public Goods, Monopolistic Competition, Group Size, Growth
JEL Classification: H41, D7
Suggested Citation: Suggested Citation