Majority rule and the public provision of a private good

This paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good: health care. The private use of health care is modeled as a supplement rather than as an exclusive alternative to public health care. A majority rule equilibrium is shown to exist. The equilibrium characterization is an example of Director's Law of Income Redistribution. A ban on private health care activities is shown to be opposed by a majority of voters. Implications for the size and distribution of private health care expenditures are drawn. * On leave from the University of Pennsylvania. I thank Marcus Berliant, Tim Besley and Steve Coate for very helpful comments and the Penn Research Foundation for financial support.