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User Charges as Redistributive Devices

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  • Alessandro Balestrino

Abstract

In this model, a mix of public and private provision of private goods arises naturally in the economy. We characterize the social optimum in the presence of a linear tax/public expenditure system and show how a user charge can be welfare‐ or Pareto‐improving, when the users are the poor. The charge discourages the rich from opting into the public program and allows the policymaker to restructure the tax/expenditure system in a way that is beneficial for the poor. If the ensuing welfare gain is large enough to outweigh the loss for the remaining users, a charge is desirable.

Suggested Citation

  • Alessandro Balestrino, 1999. "User Charges as Redistributive Devices," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 511-524, October.
    • Handle: RePEc:bla:jpbect:v:1:y:1999:i:4:p:511-524
    DOI: 10.1111/1097-3923.00024
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    Cited by:

    1. Fabbri, Daniele & Monfardini, Chiara, 2009. "Rationing the public provision of healthcare in the presence of private supplements: Evidence from the Italian NHS," Journal of Health Economics, Elsevier, vol. 28(2), pages 290-304, March.
    2. Bhattacharya, Sukanta & Saha, Sarani & Banerjee, Sarmila, 2016. "Income inequality and the quality of public services: A developing country perspective," Journal of Development Economics, Elsevier, vol. 123(C), pages 1-17.

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