Merit goods and excise taxation in quasilinear markets for complementary private consumption

Gerasimos Soldatos

Public Sector Economics, 2020, vol. 44, issue 4, 551-566

Abstract: This paper models merit goods such as education and health, in a Lindahl-Foley environment in which public goods may be treated as private ones since merit goods are public goods that could have been provided privately. It does so in terms of a Levitan-Shubik quasilinear quadratic utility from complementary commodities and uniform taxation of non-merit commodities to finance the provision of merit goods. This analytical framework serves best the purpose of characterizing the general equilibrium. Complementarity is found to serve as an engine for increased output after the introduction of taxation, with a higher volume of private goods, lower tax rate, and minimal price for the merit goods at the new equilibrium.

Keywords: merit goods; complementarity; quasilinear quadratic utility; excise taxation (search for similar items in EconPapers)
JEL-codes: D01 E02 H21 H44 H50 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ipf:psejou:v:44:y:2020:i:4:p:551-566

DOI: 10.3326/pse.44.4.6

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