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Toward an Efficiency Rationale for the Public Provision of Private Goods

Author

Listed:
  • Peter Norman

    (UNC Chapel Hill)

  • Hanming Fang

    (Upenn)

Abstract

This paper shows that public provision of private goods may be justified on pure efficiency grounds in an environment where individuals consume both public and private goods. The government's involvement in the provision of private goods provides it with information about individuals' private good purchases that facilitates more efficient revenue extraction for the provision of public goods. We show that public provision of the private good improves economic efficiency under a condition that is always fulfilled under stochastic independence and satisfied for an open set of joint distributions. Our model is an example where there is an efficiency loss from separating revenue and expenditure problems, and is therefore of more general interest for the study of optimal taxation.

Suggested Citation

  • Peter Norman & Hanming Fang, 2010. "Toward an Efficiency Rationale for the Public Provision of Private Goods," 2010 Meeting Papers 1185, Society for Economic Dynamics.
    • Handle: RePEc:red:sed010:1185
    as

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. One rationale for the public provision of public goods
      by Economic Logician in Economic Logic on 2009-02-28 01:33:00

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    Cited by:

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    2. Charles F. Manski, 2010. "When consensus choice dominates individualism: Jensen's inequality and collective decisions under uncertainty," Quantitative Economics, Econometric Society, vol. 1(1), pages 187-202, July.
    3. Dongli Cao & Chunxian Nie, 2024. "Effect of government’s environmental attention on corporate philanthropy based on the institutional theory: Evidence from China’s heavily polluting companies," PLOS ONE, Public Library of Science, vol. 19(10), pages 1-31, October.
    4. Economides, George & Philippopoulos, Apostolis & Sakkas, Stelios, 2017. "Tuition fees: User prices and private incentives," European Journal of Political Economy, Elsevier, vol. 48(C), pages 91-103.
    5. Houqe, Muhammad Nurul & van Zijl, Tony & Karim, A.K.M. Waresul & George, Thomas St, 2021. "The value relevance of corporate donations," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    6. María Amelia Gibbons & Alessandro Maffioli & Martín Rossi, 2016. "Money for Wine?: Complementarities in the Provision of Private and Public Goods to Wine Producers," IDB Publications (Working Papers) 94217, Inter-American Development Bank.
    7. Marcelo Arbex & Flavia Chein & Isabela Furtado & Enlinson Mattos, 2017. "Publicly Provided Private Goods and Informal Labor Supply," Working Papers 1710, University of Windsor, Department of Economics.

    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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