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Taxation in an economy with private provision of public goods

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  • 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)

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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Bibliographic 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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Related research

Keywords: Public goods; private provision; neutrality of taxes;

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Cited by:
  1. 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.
  2. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 639-645, August.
  3. Wolfgang Buchholz & Richard Cornes & Dirk T. G. Rübbelke, 2009. "Existence and Warr Neutrality for Matching Equilibria in a Public Good Economy: An Aggregative Game Approach," CESifo Working Paper Series 2884, CESifo Group Munich.
  4. Wolfgang Buchholz & Richard Cornes & Dirk Rübbelke, 2012. "Potentially Harmful International Cooperation on Global Public Good Provision," ANU Working Papers in Economics and Econometrics 2012-584, Australian National University, College of Business and Economics, School of Economics.
  5. Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers 003, Institute for Empirical Research in Economics - University of Zurich.
  6. Josef Falkinger, 2004. "Noncooperative Support of Public Norm Enforcement in Large Societies," CESifo Working Paper Series 1368, CESifo Group Munich.
  7. Wolfgang Buchholz & Richard Cornes & Dirk Rübbelke, 2011. "Matching as a Cure for Underprovision of Voluntary Public Good Supply: Analysis and an Example," ANU Working Papers in Economics and Econometrics 2011-541, Australian National University, College of Business and Economics, School of Economics.
  8. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2012. "Matching as a cure for underprovision of voluntary public good supply," Economics Letters, Elsevier, vol. 117(3), pages 727-729.

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