Topping Up or Opting Out? The Optimal Design of Public Provision Schemes
AbstractThere is extensive public provision of private goods in all developed countries. The public provision scheme is often designed so that individuals can opt out but not top up (supplement) the publicly provided quantity/quality. Using an optimal income tax/public provision model, the authors derive the respective conditions under which a public provision scheme should allow or forbid supplementing. Disregarding administrative costs, a system where individuals are not allowed to top up is optimal if the demand for the publicly provided good increases in the amount of leisure available, while a scheme allowing individuals to top up is warranted if the demand decreases with the amount of leisure. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 39 (1998)
Issue (Month): 2 (May)
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Other versions of this item:
- Blomquist, S. & Christiansen, V., 1995. "Topping Up of Opting Out? The Optimal Design of Public Provision Schemes," Papers 1995-13, Uppsala - Working Paper Series.
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