The Political Economy of Providing Excludable Public Goods
Kurtis J. Swope
U.S. Naval Academy
University of Colorado at Boulder and NBER;
This paper provides a positive analysis of the provision of an excludable public good that is publicly provided. Individuals differ in their taste for the public good and must decide using majority rule the method of financing and level of the excludable public good. We consider a uniform tax and fee as financing mechanisms. We show that, although the individual with the median preferences is the decisive voter in the tax regime, an individual with preferences above those of the median generally determines the level of the fee. Numerical solutions indicate that when preferences are distributed uniformly or are left-skewed, implying a population characterized by mostly high preference individuals, a majority of individuals prefers tax-based provision. When preferences are right-skewed, the majority may prefer fee-based provision. Public good provision under fees is lower relative to taxes in the former case, but may exceed that under taxes in the latter. Furthermore, the majority preferring fees in the latter case consists of a coalition of both high and low preference individuals.