When Do Distortionary Taxes Reduce the Optimal Supply of Public Goods?
AbstractIt is often argued that the optimal level of public good provision is below the first-best level as long as the government's expenditures have to be financed by distortionary taxes. I examine this hypothesis and show that it is correct in a representative consumer economy if (i) the public good is normal and (ii) private commodities are normal and gross substitutes. Otherwise, counterexamples can be constructed. These results hold also with heterogeneous households provided that equity considerations are ignored. In general, however, distributional objectives may lead to a higher level of public expenditures in second best than in first best.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 574.
Date of creation:
Date of revision: Apr 1999
Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
public goods; distortionary taxation;
Find related papers by JEL classification:
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Thomas Gaube, 2000. "Efficient Public Good Provision with Nonlinear Income Taxation," Econometric Society World Congress 2000 Contributed Papers 0850, Econometric Society.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office).
If references are entirely missing, you can add them using this form.