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Adaptation, Taxation, and Public Goods

Author

Listed:
  • Aronsson, Thomas

    (Department of Economics, Umeå School of Business and Economics)

  • Schöb, Ronnie

    (School of Business and Economics)

Abstract

This paper shows how the first-best and second-best rules for optimal public good provision depend on the adaptation to private and public consumption. Adaptation in private consumption typically leads to over-provision relative to the Samuelson condition, while adaptation in public consumption works the other way around. The two sources of adaptation only cancel out in the extreme case of full adaptation.

Suggested Citation

  • Aronsson, Thomas & Schöb, Ronnie, 2014. "Adaptation, Taxation, and Public Goods," Umeå Economic Studies 902, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0902
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    More about this item

    Keywords

    Public goods; adaptation; habit-formation; optimal taxation;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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