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Pareto-Improving Redistribution and Pure Public Goods

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  • Cornes Richard

    (Keele University, Keele, NewcastleST5 5BG, United Kingdom of Great Britain and Northern Ireland)

  • Sandler Todd

    (Iowa State University, Ames, United States of America)

Abstract

In the pure public good model, the Nash equilibrium associated with one initial income distribution may Pareto dominate the equilibrium associated with another distribution of the same aggregate income. We explore this possibility and examine its implications for Pareto-improving policy intervention by undertaking a comparative static analysis of Pareto-improving tax-financed increases in pure public good provision. Under some circumstances, a government can engineer policies that raise public good provision while increasing the well-being of contributors and noncontributors. Crucial factors promoting this outcome involve a large number of noncontributors, a high marginal valuation for the public good by non-contributors and a large aggregate response of contributors to changes in their income.

Suggested Citation

  • Cornes Richard & Sandler Todd, 2000. "Pareto-Improving Redistribution and Pure Public Goods," German Economic Review, De Gruyter, vol. 1(2), pages 169-186, May.
    • Handle: RePEc:bpj:germec:v:1:y:2000:i:2:p:169-186
    DOI: 10.1111/1468-0475.00010
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