UW-Madison UW-Madison

Staff Paper No. 497 - Abstract

Should the Government Finance Public Goods in Rural Areas? A Review of Arguments

Martin Petrick [petrick@iamo.de]

Staff Paper No. 497, April 2006, 23p.


This paper reviews three arguments why government should not directly finance public goods provision in the countryside: (1) sorting and voting of residents leads to efficient local public goods provision, (2) community governance better copes with incomplete contracting in public goods, and (3) public provision drives out voluntary private provi-sion of public goods. Theory and empirical evidence partly support these arguments. The adequate level of rural governance appears to be often below the national or Euro-pean level, and policy should focus on the institutional premises of public goods provi-sion rather than on centralized payments to public good providers.
Last updated on Wed, Apr 5, 2006 1:47pm