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Public Goods in Open Economies with Heterogeneous Individuals

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Author Info
Joseph E. Stiglitz

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Abstract

This paper formulates a simple model of "perfect community competition." It is shown that (1) the equilibrium is Pareto optimal; (2) communities will, in general, be heterogeneous; not all individuals will have the same tastes; but (3) all individuals of a given skill within the community will have identical preferences; (4) in spite of the heterogeneity of tastes, there is complete unanimity with respect to tax and expenditure policy, and there is no scope for redistribution at the local level; (5) under certain circumstances, everyone's expected utility can be increased by introducing a particular kind of unequal treatment of individuals who are otherwise identical with respect to tastes and production characteristics; (6) when there is not "perfect community competition, " the equilibrium will, in general, not be Pareto optimal, and benefit taxation may be desirable.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0802.

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Date of creation: Nov 1983
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Handle: RePEc:nbr:nberwo:0802

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  1. Joseph E. Stiglitz, 1982. "Utilitarianism and Horizontal Equity: The Case for Random Taxation," NBER Working Papers 0694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Kramer, Gerald H, 1973. "On a Class of Equilibrium Conditions for Majority Rule," Econometrica, Econometric Society, vol. 41(2), pages 285-97, March. [Downloadable!] (restricted)
  3. Berglas, Eitan, 1976. "Distribution of tastes and skills and the provision of local public goods," Journal of Public Economics, Elsevier, vol. 6(4), pages 409-423, November. [Downloadable!] (restricted)
  4. Richard J. Arnott & Joseph E. Stiglitz, 1981. "Aggregate Land Rents and Aggregate Transport Costs," NBER Working Papers 0523, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Arnott, Richard J & Stiglitz, Joseph E, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 471-500, November. [Downloadable!] (restricted)
  6. Joseph E. Stiglitz, 1984. "The Theory of Local Public Goods Twenty-Five Years After Tiebout: A Perspective," NBER Working Papers 0954, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  1. Charles A. M. de Bartolome & Stephen L. Ross, 2002. "Equilibria with Local Governments and Commuting: Income Sorting vs. Income Mixing," Working papers 2002-01, University of Connecticut, Department of Economics, revised Mar 2003. [Downloadable!]
    Other versions:
  2. Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer, vol. 4(4), pages 407-427, November. [Downloadable!] (restricted)
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