Essays on Private Contributions for Public Goods

In many circumstances, public goods are funded by both government revenue and private contributions. Private contributions to public goods could achieve the same social goals as the government-funded public goods. Certain financial aid from the voluntary sectors reduces the heavy fiscal burdens of the public sector by sharing the responsibilities of providing public goods and services. As an alternative to the public provision of public goods, social planners encourage private contributions by providing fiscal subsidies as part of the income tax policy. My dissertation addresses the questions of whether the private provision of public goods is welfare improving in various aspects of theory and how effective it is applied to the Canadian tax schedule in an empirical model. In the second chapter of this dissertation, I focus on a particular case of the consumer's utility to investigate the effect of a government transfer to the private donation of a public good. Unlike the classic conclusion, the influence of income redistribution is not always neutral when I take consideration of the substitute relationship between the private contributed public good and the public provision of a public good. Then in chapter 3, I build on the traditional income tax model in Part I and improve it to a two-stage non-cooperative game in which it encompasses both governments funded public goods and private contributions in the optimal income tax problem in Part II. Finally, in chapter 4, I apply my theoretical model in an empirical setting using Canadian family expenditure data. I exploit this rich data on charitable contribution in Canada to assess the effectiveness of Canadian tax incentive towards charitable giving from the private sector. The empirical analysis illustrates that individuals in Canada are quite responsive to the change of tax incentive for charitable donation since price elasticity, in general, exceeds 1 in absolute value.