The time consistent public goods provision

Shigeo Morita ()
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Shigeo Morita: Graduate School of Economics, Osaka University

No 14-31, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

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.

Keywords: Public goods provision; Optimal Taxation; Time consistency (search for similar items in EconPapers)
JEL-codes: D82 H21 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-10
New Economics Papers: this item is included in nep-pbe and nep-pub
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