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Public Policy with Endogenous Preferences
Author(s) -
BARGILL OREN,
FERSHTMAN CHAIM
Publication year - 2005
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2005.00248.x
Subject(s) - subsidy , economics , incentive , microeconomics , preference , public economics , public good , distribution (mathematics) , population , market economy , mathematical analysis , demography , mathematics , sociology
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.