Income Distribution and the Optimal Provision of Local Public Goods
This paper analyzes how the distribution of gross income among residents in a locality affects the local provision of public goods. The analysis is based on a two-type model, where the local residents can be either high income earners or low income earners. Local provision is assumed to reflect the actions of a benthamite planner giving equal weight to the utilities of all inhabitants. In this framework, three factors turn out to be particularly important for how the distribution of private income across local residents effects the local provision of public goods: (i) the local means of redistribution and taxation, (ii) the particular form of the local residents' utility functions and (iii) migration across localities.
|Date of creation:||30 Apr 1999|
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