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Open Access Publications from the University of California

Do Government Subsidies Increase the Private Supply of Public Goods?

  • Author(s): Bergstrom, Ted
  • Andreoni, Jim
  • et al.

Can the government get people to contribute more to public goods by subsidizing voluntary contributions. In a general equilibrium model, answering this question is not a slam dunk, especially given the remarkable "neutrality theorems" in the theory of voluntary contributions. But our model yields a surprisingly decisive comparative statics result. If public goods and private goods are both normal goods, then increases in the subsidy rate necessarily increase the equilibrium supply of public goods.

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