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Toward an Efficiency Rationale for the Public Provision of Private Goods Author info | Abstract | Publisher info | Download info | Related research | Statistics Hanming Fang
Peter Norman
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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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Date of creation: Feb 2008Date of revision:
Handle: RePEc:nbr:nberwo:13827Note: PEContact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
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Find related papers by JEL classification: D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
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