Discussion Papers 2020

CIRJE-F-1150	"A Theory of Public Goods under Complementarity between Safety and Consumptions"
Author Name	Aiba, Ikuto and Yasuhiro Sato
Date	April 2020
Full Paper	PDF file
Remarks

Abstract
We explore the theoretical properties of public good provision under the complementarity between safety and private/public good consumption. The presence of the mobile worker generates fiscal externality, making the equilibrium ineffcient. The direction of ineffciency is determined by three factors: the characteristics of the utility function, the difference in income between the immobile and mobile workers, and the immobile worker’s marginal utility of hosting another mobile worker. We show that the complementarity between safety and private good consumption plays a crucial role in determining the impacts of the third factor whereas the complementarity between safety and public good does not.

Abstract

We explore the theoretical properties of public good provision under the complementarity between safety and private/public good consumption. The presence of the mobile worker generates fiscal externality, making the equilibrium ineffcient. The direction of ineffciency is determined by three factors: the characteristics of the utility function, the difference in income between the immobile and mobile workers, and the immobile worker’s marginal utility of hosting another mobile worker. We show that the complementarity between safety and private good consumption plays a crucial role in determining the impacts of the third factor whereas the complementarity between safety and public good does not.