The inefficiency of firm-augmenting public input vs. The inapplicability of provision rules
This paper contributes to the debate about the appropriate efficiency rule for the provision of a firm-augmenting public input. This debate is caused by the dissatisfaction of Kaizuka-rule, i.e. a Samuelson-type condition for public inputs, in the long run. Therefore the applicability of Kaizuka-rule has been questioned. By developing an alternative efficiency rule this paper shows that firm-augmenting public input cannot be provided efficiently. The latter is due to the goods’ properties of firm-augmenting public input along with the assumption of firm-augmenting public input as an intermediate good a long term efficient equilibrium is excluded a priori. Consequently firm- augementing public input is unsuited for depicting public intermediate goods in economic models. Thus models, which use firm-augmenting public input, such as that of fiscal competition and of endogenous growth, should be reconsidered.
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.:
- Barro, Robert J. & Sala-i-Martin, Xavier, 1992.
"Public Finance in Models of Economic Growth,"
CEPR Discussion Papers
630, C.E.P.R. Discussion Papers.
- McMillan, John, 1979. "A Note on the Economics of Public Intermediate Goods," Public Finance = Finances publiques, , vol. 34(2), pages 293-299.
- Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-248.
- Matsumoto, Mutsumi, 2000. "A Tax Competition Analysis of Congestible Public Inputs," Journal of Urban Economics, Elsevier, vol. 48(2), pages 242-259, September.
- Hillman, Arye L, 1978. "Symmetries and Asymmetries between Public Input and Public Good Equilibria," Public Finance = Finances publiques, , vol. 33(3), pages 269-279.
- Richter, Wolfram F., 1994.
"The efficient allocation of local public factors in Tiebout's tradition,"
Regional Science and Urban Economics,
Elsevier, vol. 24(3), pages 323-340, June.
- Richter, W.F., 1991. "The Efficient Allocation of Local Public Factors in Tiebout's Tradition," The Warwick Economics Research Paper Series (TWERPS) 378, University of Warwick, Department of Economics.
- Boadway, Robin W, 1973. "Similarities and Differences between Public Goods and Public Factors," Public Finance = Finances publiques, , vol. 28(3-4), pages 245-258.
- James Feehan, 1998. "Optimal Provision of Hicksian Public Inputs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 693-707, August.
- Turnovsky, Stephen J., 1996. "Optimal tax, debt, and expenditure policies in a growing economy," Journal of Public Economics, Elsevier, vol. 60(1), pages 21-44, April.
- Henderson, J V, 1974. "A Note on the Economics of Public Intermediate Inputs," Economica, London School of Economics and Political Science, vol. 41(163), pages 322-327, August.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:0410003. 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: (EconWPA)
If references are entirely missing, you can add them using this form.