Comparing the First-Best and Second-Best Provision of a Club Good: An Example
Excludable and congestible shared goods - club goods (e.g., internet access facilities) - are more prevalent than Samuelsonian public goods. Our example shows that, unlike the usual presumption with pure public goods, the optimal second-best supply of a club good might exceed its first-best level. We argue that this arises because user charges can be levied on club goods the government need not impose distortionary taxes to finance them. Thus, the first and second best in a club economy differ mainly because informational constraints prevent the government achieving the right income distribution in the latter.
(This abstract was borrowed from another version of this item.)
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- Gaube, Thomas, 2000. "When do distortionary taxes reduce the optimal supply of public goods?," Journal of Public Economics, Elsevier, vol. 76(2), pages 151-180, May. Full references (including those not matched with items on IDEAS)
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