On strong independence of allocative efficiency from distribution in the theory of public goods
We extend Bergstrom and Cornes (1983) to show that for strong independence of efficient allocations from distribution in a public goods economy, the utility functions of all consumers must identically be of the form: A(Y)Xi, where Y and Xi are respectively the quantities of public good and private good for consumer i, and A(⋅) is some arbitrary function. This implies that for an economy with heterogeneous consumer preferences, it is impossible to ensure that any redistribution of private goods will remain efficient, especially for boundary Pareto optima.
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- Stoker, Thomas M, 1984. "Completeness, Distribution Restrictions, and the Form of Aggregate Functions," Econometrica, Econometric Society, vol. 52(4), pages 887-907, July.
- Arthur Lewbel, 1989. "Exact Aggregation and a Representative Consumer," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 621-633.
- Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-1765, November.
- Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-999, September.
- Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
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