The Limit of Public Policy: Endogenous Preferences

O. Bar-Gill, C. Fershtman

Research output: Working paperDiscussion paperOther research output

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Abstract

In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy.Public policy may also affect the formation of preferences and norms in a society.The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior.In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages27
Volume2000-71
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-71

Fingerprint

Endogenous preferences
Public policy
Evolution of preferences
Monetary incentives
Subsidies
Preference change
Trigger

Keywords

  • public policy

Cite this

Bar-Gill, O., & Fershtman, C. (2000). The Limit of Public Policy: Endogenous Preferences. (CentER Discussion Paper; Vol. 2000-71). Tilburg: Microeconomics.
Bar-Gill, O. ; Fershtman, C. / The Limit of Public Policy : Endogenous Preferences. Tilburg : Microeconomics, 2000. (CentER Discussion Paper).
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Bar-Gill, O & Fershtman, C 2000 'The Limit of Public Policy: Endogenous Preferences' CentER Discussion Paper, vol. 2000-71, Microeconomics, Tilburg.

The Limit of Public Policy : Endogenous Preferences. / Bar-Gill, O.; Fershtman, C.

Tilburg : Microeconomics, 2000. (CentER Discussion Paper; Vol. 2000-71).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

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AU - Fershtman, C.

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N2 - In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy.Public policy may also affect the formation of preferences and norms in a society.The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior.In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.

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Bar-Gill O, Fershtman C. The Limit of Public Policy: Endogenous Preferences. Tilburg: Microeconomics. 2000. (CentER Discussion Paper).