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Topping Up of Opting Out? The Optimal Design of Public Provision Schemes

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  • Blomquist, S.
  • Christiansen, V.

Abstract

There is extensive public provision of private goods in all developed countries. The public provision scheme is often designed so that individuals can opt out but not top up (supplement) the publicly provided quantity/quality. Using an optimal income tax/public provision model, the authors derive the respective conditions under which a public provision scheme should allow or forbid supplementing. Disregarding administrative costs, a system where individuals are not allowed to top up is optimal if the demand for the publicly provided good increases in the amount of leisure available, while a scheme allowing individuals to top up is warranted if the demand decreases with the amount of leisure. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Suggested Citation

  • Blomquist, S. & Christiansen, V., 1995. "Topping Up of Opting Out? The Optimal Design of Public Provision Schemes," Papers 1995-13, Uppsala - Working Paper Series.
  • Handle: RePEc:fth:uppaal:1995-13
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    References listed on IDEAS

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    1. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-478, August.
    2. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
    3. Besley, Timothy, 1991. " Welfare Improving User Charges for Publicly Provided Private Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(4), pages 495-510.
    4. Henry Ohlsson & Michael Lundholm, 1998. "Wages, taxes and publicly provided day care," Journal of Population Economics, Springer;European Society for Population Economics, vol. 11(2), pages 185-204.
    5. Bergstrom, Ted & Blomquist, Soren, 1996. "The political economy of subsidized day care," European Journal of Political Economy, Elsevier, vol. 12(3), pages 443-457, November.
    6. Gahvari, Firouz, 1995. "In-Kind versus Cash Transfers in the Presence of Distortionary Taxes," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 45-53, January.
    7. Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-984, September.
    9. Ireland, Norman J., 1990. "The mix of social and private provision of goods and services," Journal of Public Economics, Elsevier, vol. 43(2), pages 201-219, November.
    10. Guesnerie, Roger & Roberts, Kevin, 1984. "Effective Policy Tools and Quantity Controls," Econometrica, Econometric Society, vol. 52(1), pages 59-86, January.
    11. Bergstrom, Ted & Blomquist, Soren, 1996. "The political economy of subsidized day care," European Journal of Political Economy, Elsevier, vol. 12(3), pages 443-457, November.
    12. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
    13. Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-567, December.
    14. Munro, Alistair, 1991. "The optimal public provision of private goods," Journal of Public Economics, Elsevier, vol. 44(2), pages 239-261, March.
    15. Munro, Alistair, 1989. "In-kind transfers, cash grants and the supply of labour," European Economic Review, Elsevier, vol. 33(8), pages 1597-1604, October.
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    Keywords

    PUBLIC GOODS; ECONOMIC MODELS;

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