Edited by Francisco Cabrillo and Miguel A. Puchades-Navarro
Chapter 16: Voluntary provision of public goods
The standard theory of public goods shows that the market cannot efficiently supply public goods. The non-excludability of public goods prevents voluntary funding. As a result the supply of public goods cannot be based on voluntary gifts but on compulsory government exactions. However, in contrast to this conclusion, we actually find numerous non-profit institutions supplying a wide range of public and quasi-public goods; and in recent decades a large number of non-governmental organizations have emerged around the world. How do economists bridge this gap between theory and evidence? The literature related to non-profit organizations has experienced significant growth, dealing with their operation, funding and performance. Two main arguments support the emergence of non-profit institutions: the unsatisfied demand and the private consumer model.
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