Public policy with endogenous preferences

Oren Bar-Gill, Chaim Fershtman

Research output: Contribution to journalArticlepeer-review

Abstract

Public policy may influence norms and preferences. By altering the payoffs associated with different preferences, public policy may influence the distribution of these preferences in the population. Such interdependence between policy and preferences may limit (or enhance) the effectiveness of different policies. We demonstrate this idea with a simple model of subsidizing contributions to a public good. While the short-run effect of such a subsidy will be an increase in the overall contribution, the subsidy triggers an endogenous preference change that results in a lower level of contribution to the public good, despite the explicit monetary incentives to raise that level.

Original languageEnglish
Pages (from-to)841-857
Number of pages17
JournalJournal of Public Economic Theory
Volume7
Issue number5
DOIs
StatePublished - 2005

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