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Toward an efficiency rationale for the public provision of private goods

  • Hanming Fang

    ()

  • Peter Norman

    ()

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    Public provision of a private goods is justified on efficiency grounds in a model with no redistributive preferences. A government’s involvement in the provision of a private good generates information about preferences that facilitates more efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is always fulfilled under independence and satisfied for an open set of joint distributions. The efficiency gains require that consumers cannot arbitrage the publicly provided private good, so our analysis applies to private goods where it is easy to keep track of the ultimate user, such as schooling and health care, but not to easily tradable consumer goods. Copyright Springer-Verlag Berlin Heidelberg 2014

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    File URL: http://hdl.handle.net/10.1007/s00199-013-0790-y
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    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 56 (2014)
    Issue (Month): 2 (June)
    Pages: 375-408

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    Handle: RePEc:spr:joecth:v:56:y:2014:i:2:p:375-408
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    1. Hanming Fang & Peter Norman, 2003. "Optimal Provision of Multiple Excludable Public Goods," Cowles Foundation Discussion Papers 1441R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2006.
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    5. Hellwig, Martin, 2004. "The Provision and Pricing of Excludable Public Goods: Ramsey-Boiteux Pricing versus Bundling," Sonderforschungsbereich 504 Publications 04-02, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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    11. Jukka Pirttilä & Sanna Tenhunen, 2008. "Pawns and queens revisited: public provision of private goods when individuals make mistakes," International Tax and Public Finance, Springer, vol. 15(5), pages 599-619, October.
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