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Decentralizing Public Goods Production

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  • MICHAEL LUNDHOLM

Abstract

Decentralized decisions, to a bureau with a given budget, about the production of public goods is analyzed within a general equilibrium model with a representative agent and no pure profits. Contrary to previous results on decentralization it is shown that sequential decentralization (i) does not necessarily imply aggregate production efficiency and (ii) need not be optimal even if all public goods are neutral. Also, cost-benefit criteria are derived and the marginal cost of public funds is characterized. Copyright 2008 Blackwell Publishing, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 10 (2008)
Issue (Month): 2 (04)
Pages: 259-279

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Handle: RePEc:bla:jpbect:v:10:y:2008:i:2:p:259-279

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  1. Joseph E. Stiglitz & Partha Dasgupta, 1970. "Differential Taxation, Public Goods, and Economic Efficiency," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 299, Cowles Foundation for Research in Economics, Yale University.
  2. Besley, Timothy & Jewitt, Ian, 1991. "Decentralizing Public Good Supply," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1769-78, November.
  3. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, Elsevier, vol. 87(12), pages 2611-2637, December.
  4. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 119-28, January.
  5. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers, Queen's University, Department of Economics 828, Queen's University, Department of Economics.
  6. Boadway, Robin & Horiba, Isao & Jha, Raghbendra, 1999. " The Provision of Public Services by Government Funded Decentralized Agencies," Public Choice, Springer, Springer, vol. 100(3-4), pages 157-84, September.
  7. Gronberg, Timothy & Liu, Liqun, 2001. " The Second-Best Level of a Public Good: An Approach Based on the Marginal Excess Burden," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 431-53.
  8. Hansson, Ingemar, 1984. " Marginal Cost of Public Funds for Different Tax Instruments and Government Expenditures," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 86(2), pages 115-30.
  9. Munk, Knud Jorgen, 1978. " Optimal Taxation and Pure Profit," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 80(1), pages 1-19.
  10. Gaube, Thomas, 2000. "When do distortionary taxes reduce the optimal supply of public goods?," Journal of Public Economics, Elsevier, Elsevier, vol. 76(2), pages 151-180, May.
  11. Sandmo, Agnar, 1998. "Redistribution and the marginal cost of public funds," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 365-382, December.
  12. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(3), pages 117-131, Summer.
  13. Lau, Lawrence J & Sheshinski, Eytan & Stiglitz, Joseph E, 1978. "Efficiency in the Optimum Supply of Public Goods," Econometrica, Econometric Society, Econometric Society, vol. 46(2), pages 269-84, March.
  14. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 447-57, July.
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Cited by:
  1. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
  2. Fabio Fiorillo & Agnese Sacchi, 2012. "The Political Economy of the Standard Level of Services: The Role of Income Distribution," CESifo Working Paper Series 3696, CESifo Group Munich.

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