Abstract

This paper develops a theoretical model of voluntary contributions to a public good in a large economy where the impact of each individual's contribution on the total provision is negligible, and people's preference consists of extrinsic and intrinsic payoffs. Of particular interest is moral motivation that is assumed to be formulated internally and independently of other people in the intrinsic payoff. Adopting an equilibrium concept, we discuss public provision that could affect moral motivation. With this approach, we demonstrate that a wide variety of crowd-out/in hypotheses can occur within a single framework, once the interplay between extrinsic and intrinsic payoffs is introduced. The model provides the conditions under which public provision induces crowd-out as well as crowd-in. It is shown that the effect of public provision highly depends on the degree of motivational shift originating from the intrinsic payoff as well as the characteristics of the public good in relation to the private good in the extrinsic payoff.