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The time consistent public goods provision

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  • Shigeo Morita

    (Graduate School of Economics, Osaka University)

Abstract

In this study, we reconsider the optimal non-linear tax problem with the public goods from the perspective of the commitment issue and examine how it affects the condition of the public goods provision. We show that the Samuelson rule should be modified when the government cannot commit and the skill types of taxpayers are revealed. Even if taxpayers have the same preference, which is separable and additive with respect to consumption and leisure, the Samuelson rule breaks down. Our analysis focuses on the effect of commitment issue on the marginal cost of public funds and the level of public goods provision. Our findings imply that the level of investment in public goods may be excessive in comparison to the case where the commitment issue is not considered.

Suggested Citation

  • Shigeo Morita, 2014. "The time consistent public goods provision," Discussion Papers in Economics and Business 14-31, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1431
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    References listed on IDEAS

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    More about this item

    Keywords

    Public goods provision; Optimal Taxation; Time consistency;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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