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Measurement of the social loss of wrong public budget allocation

Author

Listed:
  • Nissim Ben-David
  • Tchai Tavor

Abstract

Purpose - The purpose of this paper is to measure the social loss occurring due to the inability of the government to use the real public demand function. Design/methodology/approach - The authors developed a model that enables maximization of the public utility of a given public budget by maximizing total consumer surplus, and presented a method for calculating the social loss due to the inability to use the real public demand function. Findings - The social loss occurring due to the inability of the government to use the real public demand curve was shown. Research limitations/implications - In reality, it is impossible to get the proper evaluation of social utility function. Instead, the authors assumed a given public demand for each public good. Practical implications - The paper presents a way to measure overtime social loss as a function of the sum of overtime government expenses, the coefficient of variation of the public good supply and the elasticity of demand of the average demand curve. Social implications - Improving the allocation of public budget. Originality/value - Given the demand curve for each public good, this paper presents a technique for the optimal allocation of a given budget in order to maximize aggregate consumer surplus.

Suggested Citation

  • Nissim Ben-David & Tchai Tavor, 2011. "Measurement of the social loss of wrong public budget allocation," International Journal of Social Economics, Emerald Group Publishing, vol. 38(3), pages 209-217, February.
    • Handle: RePEc:eme:ijsepp:v:38:y:2011:i:3:p:209-217
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    References listed on IDEAS

    as
    1. Aliza Fleischer & Daniel Felsenstein, 2002. "Cost-Benefit Analysis Using Economic Surpluses: A Case Study of a Televised Event," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 26(2), pages 139-156, May.
    2. Brookshire, David S, et al, 1982. "Valuing Public Goods: A Comparison of Survey and Hedonic Approaches," American Economic Review, American Economic Association, vol. 72(1), pages 165-177, March.
    3. Hockley, G. C. & Harbour, G., 1983. "Revealed preferences between public expenditures and taxation cuts: Public sector choice," Journal of Public Economics, Elsevier, vol. 22(3), pages 387-399, December.
    4. James Ferris, 1983. "Demands for public spending: An attitudinal approach," Public Choice, Springer, vol. 40(2), pages 135-154, January.
    5. Franco Papandrea, 1999. "Willingness to Pay for Domestic Television Programming," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 23(3), pages 147-164, August.
    6. Hans Groot & Evert Pommer, 1987. "Budgetgames and the private and social demand for mixed public goods," Public Choice, Springer, vol. 52(3), pages 257-272, January.
    7. D.A.L. Auld, 1980. "Preference Revelation for Public Goods: an Empirical Analysis," Public Finance Review, , vol. 8(3), pages 277-289, July.
    8. Garber, Alan M., 2000. "Advances in cost-effectiveness analysis of health interventions," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 4, pages 181-221 Elsevier.
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