Three Essays On Public Economics PDF Download

The first essay extends the theory of clubs by stating new conditions, spatially-limited altruism, under which mixed clubs are optimal. With such altruism, the nonpoor members of society care more about the poor living near them than about those living farther away. While the proximity of the poor gives mixed communities an altruistic advantage over homogeneous communities, the intermixing of rich and poor generates an efficiency loss in public consumption. As a result, a mixed community configuration may or may not be superior to a homogeneous configuration. The second essay addresses the potential optimality of multiproduct clubs when the joint cost function of such clubs exhibits economies of scope. On the one hand, the joint provision of public goods in multiproduct clubs leads to cost savings under economies of scope. However, there is an efficiency loss from such clubs, since consumption group sizes cannot be set individually for each good. The analysis formalizes these costs and benefits and deriving conditions under which multiproduct clubs are desirable. The third essay analyses the effect of public provision of a loss-preventive good on competitive equilibrium of an insurance market under moral hazard. The primary advantage of public provision lies in its ability to produce information, which eliminates moral hazard. On the other hand, it leads to a different cost of providing the good because of scale (dis)economies in public consumption and production as well as consumption inefficiency with nonidentical individuals. The analysis formalizes this benefit and cost involved in public provision.