Toward an Efficiency Rationale for the Public Provision of Private Goods / Hanming Fang, Peter Norman.

Format:

Book

Author/Creator:

Fang, Hanming.

Contributor:

National Bureau of Economic Research.

Norman, Peter.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13827.

NBER working paper series no. w13827

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

This paper shows that public provision of private goods may be justified on pure efficiency grounds in an environment where individuals consume both public and private goods. The government's involvement in the provision of private goods provides it with information about individuals' private good purchases that facilitates more efficient revenue extraction for the provision of public goods. We show that public provision of the private good improves economic efficiency under a condition that is always fulfilled under stochastic independence and satisfied for an open set of joint distributions. Our model is an example where there is efficiency loss from separating revenue and expenditure problems in public finance, and is therefore of more general interest for the study of optimal taxation.

Notes:

Print version record

February 2008.