ABSTRACT
This chapter presents a big chunk of government expenditures in virtually every part of the world. Public goods include national defense, roads, bridges, and general infrastructure, just to name a few. Governments spend a lot of time deciding how much to provide and how to pay for public goods. So it seems appropriate to start our full-fledged political economy analysis of policy with the provision of public goods. All goods and services in a political economy can be classified according to two basic characteristics: rivalry and excludability. The two characteristics combined generate the following taxonomy: pure private goods, pure public goods, impure private good and impure public goods. The chapter considers private provision of public goods through two types of market mechanisms. In the first environment, a standard competitive market for public goods is considered. In the second, a strategic environment where agents play a voluntary contribution game is studied.
