Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 10, 2020 erstellt
Beschreibung:
We consider a model of ‘public provision of private goods supplemented by private topping-up’ a la Epple and Romano (1986a), in which majority-voting determines the government’s capacity of public provision, and unsatisfied private demand determines the equilibrium level of ‘consumption topping-up’ via purchase of market-supplied substitute goods. In such a model of public-private provision, we study the impact of changes in production efficiencies in the public and the private sectors on the volume of public provision, on the extent of private topping-up, and on changes in the welfare of citizens in different income classes. We focus on the consequences of a deteriorating public-provision regime on overall equilibrium outcomes, and identify the following effects: (a) such deterioration raises ‘utility inequality’ as richer citizens engage in increased topping-up; (b) incremental changes in public sector efficiency can generate large discontinuous changes in demand for market-supplied substitute goods and in individual welfare; and (c) any improvement in production technologies of such substitute goods can discretely lower the welfare of poor citizens