Taxation in an economy with private provision of public goods

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Taxation in an economy with private provision of public goods

Author Info

Josef Falkinger () (University of Regensburg, Department of Economics, Universitätsstraße 31, D-93053 Regensburg, Germany)
Johann K. Brunner () (University of Linz, Department of Economics, Altenberger Straße 69, A-4040 Linz, Austria)

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Abstract

This paper analyses the effects of taxation and subsidies in an economy with private provision of a public good. It is shown that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others. We then consider linear nonneutral tax-subsidy schemes and analyse efficiency and uniqueness of the resulting Nash equilibria. We show that an efficient Nash equilibrium, where all individuals contribute, will in general not be unique, and establish a non-uniformity property which a tax-subsidy scheme must fulfil in order to induce a unique interior equilibrium that is efficient. Throughout the paper it is assumed that individuals fully understand and take into account the government's budget constraint.

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Publisher Info
Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 4 (1999)
Issue (Month): 4 ()
Pages: 357-379
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Handle: RePEc:spr:reecde:v:4:y:1999:i:4:p:357-379

Note: Received: 3 November 1997 / Accepted: 23 March 1999
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Find related papers by JEL classification:
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

Cited by:
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Josef Falkinger, 2004. "Noncooperative Support of Public Norm Enforcement in Large Societies," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Villanacci, Antonio & Zenginobuz, Unal, 2001. "On the neutrality of redistribution in a general equilibrium model with public goods," MPRA Paper 190, University Library of Munich, Germany, revised 09 Aug 2005. [Downloadable!]
Other versions:
- Antonio Villanacci & Ünal Zenginobuz, 2007. "On the Neutrality of Redistribution in a General Equilibrium Model with Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 183-200, 04. [Downloadable!] (restricted)
Josef Falkinger et al., 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March. [Downloadable!] (restricted)
Other versions:
- Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers iewwp003, Institute for Empirical Research in Economics - IEW. [Downloadable!]

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