Private Choice and Collective Outcomes: Evidence From Public Sector Demand Analysis

Developments over the last three decades in the theory of public choice suggest that the public sector can be analyzed in terms of behavioral economic theory. The public choice paradigm offers the possibility of understanding and predicting the effects of intergovernmental aid programs, tax reform proposals, alternative collective decision-making institutions, and other phenomena. Yet, without empirical corroboration, or estimates of relative magnitudes of factors involved, it often fails as a useful guide to policy analysis. The gap between theory and evidence has been partially closed during the last decade, in part as a result of attempts to empirically study demands for public goods. Besides providing information on the nature of such demands, these efforts have raised new questions and opened new avenues for public policy analysis.