Public strongEconomiesstrong and the Endogenous Choice of Institutions.pdfVIP

Public Economies and the Endogenous Choice of Institutions Eduardo Zambranoy June, 2005 Abstract In this paper I provide a framework in which to formalize the seminal work of Elinor Ostrom on the study of public economies, a prominent theoretical construct aimed to provide answers to the following questions: (a) Why some societies are able to solve their collective action problems and others are not? and (b) Why societies choose the particular institutions they choose from a vast array of possible choices? I would like to thank David Easley, Larry Blume, Kaushik Basu, David Kaplan, Garance Genicot, Francisco RodrÌguez and participants at two Cornell seminar for their comments to a previous version of this work. All remaining shortcomings are mine. yDepartment of Finance, Mendoza College of Business, Notre Dame, IN 46556. E-mail: zam- brano.1@nd.edu. Phone: 574-631-4597. Fax: 574-631-5255. 1 1 Introduction Why some societies are able to solve their collective action problems and others are not? Why societies choose the particular institutions they choose from a vast array of possible choices? In this article I provide a framework in which to formalize the seminal work of Elinor Ostrom on the study of public economies, a prominent theoretical construct aimed to provide answers to those important questions. A public economy simply deÖned is a form of economic organization dedicated to the production, provision and consumption of collective goods. In several studies Ostrom and her co-authors have developed a set of hypotheses regarding the process by which public economies hav