TAILIEUCHUNG - Green Markets and Private Provision of Public Goods

In May 2010, the World Health Assembly (WHA), through resolution , endorsed a set of recommendations on the marketing of foods and non-alcoholic beverages to children. The main purpose of the recommendations was to guide efforts by Member States in designing new policies, or strengthening existing policies, on food marketing communications to children in order to reduce the impact of marketing foods high in saturated fats, trans-fatty acids, free sugars, or salt. Resolution requested that the Director-General provide technical support to Member States in the implementation, as well as the monitoring and evaluation, of the recommendations. This framework document. | Green Markets and Private Provision of Public Goods by Matthew J. Kotchen Department of Economics Fernald House Williams College Williamstown MA 01267 Email mkotchen@ Telephone 413 597-2101 Fax 413 597-4045 April 2003 I gratefully acknowledge financial support from the . Environmental Protection Agency s National Center for Environmental Research STAR grants U915602010 and R828626 . I thank Jim Andreoni Jasper Hoek Emma Hutchinson Michael Moore Antonio Rangel Steve Salant Joel Slemrod Klaas van t Veld and Rob Williams for many helpful discussions and suggestions. Green Markets and Private Provision of Public Goods Abstract This paper develops a general model of private provision of a public good that includes the option to consume an impure public good. I use the model to investigate positive and normative consequences of green markets. Green markets give consumers a new choice instead of simply consuming a private good and making a donation to an environmental public good consumers can purchase an impure public good that produces characteristics of both activities jointly. Many governments nongovernmental organizations and industries promote green markets as a decentralized mechanism of environmental policy. Nevertheless I show that under quite reasonable assumptions green markets can have detrimental effects on both environmental quality and social welfare. I then derive conditions that are sufficient to rule out such unintended consequences. The analysis applies equally to non-environmental choice settings where the joint p ro ducts of an impure public good are also available separately. Such choice settings are increasingly prevalent in the economy with impure public goods ranging from socially-responsible investments to commercial activities associated with charitable fund-raising. JEL Classiflcation Numbers D6 H4 Q2. 1 Introduction The economics literature on private provision of public goods has grown extensively over the last 25 years. The .

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