On the optimal level of public inputs
This paper studies the optimal level of public inputs under two different tax settings. With this aim, we adapt the approach by Gronberg and Liu (2001) to the case of productivity-enhancing public spending. We find that it is not analytically clear whether the first-best level of public spending exceeds the second-best level. After taking account the type of public input, a wide numerical simulation has been carried out. We obtain that the second-best level is always below the first-best level but the criterion by Gronberg and Liu has to be qualified.
|Date of creation:||Dec 2006|
|Date of revision:||Mar 2008|
|Contact details of provider:|| Postal: Carretera de Utrera km.1, 41013 Sevilla|
Phone: + 34 954 34 8913
Fax: + 34 954 34 9339
Web page: http://www.upo.es/econ/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- A. B. Atkinson & N. H. Stern, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 119-128.
- Sandmo, Agnar, 1972. "Optimality rules for the provision of collective factors of production," Journal of Public Economics, Elsevier, vol. 1(1), pages 149-157, April.
- 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.
- Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
- Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 227-43, April.
- Triest, Robert K, 1990. "The Relationship between the Marginal Cost of Public Funds and Marginal Excess Burden," American Economic Review, American Economic Association, vol. 80(3), pages 557-66, June.
- Thomas Gaube, 2005. "Financing Public Goods with Income Taxation: Provision Rules vs. Provision Level," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 319-334, May.
- Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-48.
- Gronberg, Timothy & Liu, Liqun, 2001. " The Second-Best Level of a Public Good: An Approach Based on the Marginal Excess Burden," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 431-53.
- Wilson, John Douglas, 1991. "Optimal Public Good Provision with Limited Lump-Sum Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 153-66, March.
- A. Jesus Sanchez Fuentes & Diego Martinez Lopez, 2006. "A new approach to solve non-regular constrained optimization problems. An application to optimal provision of public inputs," Working Papers 06.35, Universidad Pablo de Olavide, Department of Economics.
- Ming Chang, 2000. "Rules and Levels in the Provision of Public Goods: The Role of Complementarities between the public Good and Taxed Commodities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(1), pages 83-91, February.
- Pestieau, Pierre, 1978. "Public intermediate goods and distortionary taxation," European Economic Review, Elsevier, vol. 7(4), pages 351-357, May.
- Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
- Browning, Edgar K & Gronberg, Timothy & Liu, Liqun, 2000. "Alternative Measures of the Marginal Cost of Funds," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 591-99, October.
- James P. Feehan, 2002. "Distortionary Taxation and Optimal Public Spending on Productive Activities," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 60-68, January.
When requesting a correction, please mention this item's handle: RePEc:pab:wpaper:06.34. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publicación Digital - UPO)
If references are entirely missing, you can add them using this form.