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A note on the link between public expenditures and distortionary taxation

Author

Listed:
  • Thomas Gaube

    (Department of Economics, University of Vienna)

Abstract

This note deals with the optimal provision of a public good in the context of the Ramsey tax model. It is shown that the second-best level of public good provision is inefficiently low relative to a situation where additional expenditures can be financed by lump-sum taxation.

Suggested Citation

  • Thomas Gaube, 2007. "A note on the link between public expenditures and distortionary taxation," Economics Bulletin, AccessEcon, vol. 8(9), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-07h40004
    as

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    References listed on IDEAS

    as
    1. Ming Chang, 2000. "Rules and Levels in the Provision of Public Goods: The Role of Complementarities between the public Good and Taxed Commodities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(1), pages 83-91, February.
    2. Thomas Gaube, 2005. "Financing Public Goods with Income Taxation: Provision Rules vs. Provision Level," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 319-334, May.
    3. 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, vol. 3(4), pages 431-453.
    4. Wilson, John Douglas, 1991. "Optimal Public Good Provision with Limited Lump-Sum Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 153-166, March.
    5. Gaube, Thomas, 2000. "When do distortionary taxes reduce the optimal supply of public goods?," Journal of Public Economics, Elsevier, vol. 76(2), pages 151-180, May.
    6. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
    7. Triest, Robert K, 1990. "The Relationship between the Marginal Cost of Public Funds and Marginal Excess Burden," American Economic Review, American Economic Association, vol. 80(3), pages 557-566, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. A. Sanchez & Diego Martinez, 2011. "Optimization in Non-Standard Problems. An Application to the Provision of Public Inputs," Computational Economics, Springer;Society for Computational Economics, vol. 37(1), pages 13-38, January.
    2. Diego Martinez & Tomas Sjögren, 2009. "Can Labor Market Imperfections Cause Overprovision of Public Inputs?," Working Papers 09.13, Universidad Pablo de Olavide, Department of Economics.

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    More about this item

    Keywords

    distortionary taxation;

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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