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Toward an Efficiency Rationale for the Public Provision of Private Goods

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  • Hanming Fang
  • Peter Norman

Abstract

This paper shows that public provision of private goods may be justified on pure efficiency grounds in an environment where individuals consume both public and private goods. The government's involvement in the provision of private goods provides it with information about individuals' private good purchases that facilitates more efficient revenue extraction for the provision of public goods. We show that public provision of the private good improves economic efficiency under a condition that is always fulfilled under stochastic independence and satisfied for an open set of joint distributions. Our model is an example where there is efficiency loss from separating revenue and expenditure problems in public finance, and is therefore of more general interest for the study of optimal taxation.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13827.

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Date of creation: Feb 2008
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Publication status: published as Toward an Efficiency Rationale for the Public Provision of Private Goods (with Peter Norman), This Version, June 2012, forthcoming, Economic Theory.
Handle: RePEc:nbr:nberwo:13827

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  20. Miguel Gouveia, 1997. "Majority rule and the public provision of a private good," Public Choice, Springer, Springer, vol. 93(3), pages 221-244, December.
  21. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, Elsevier, vol. 41(1), pages 97-114, January.
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  24. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(3), pages 475-98, August.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. One rationale for the public provision of public goods
    by Economic Logician in Economic Logic on 2009-02-27 19:33:00

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