Relative-Income Effects and the Appropriate Level of Public Expenditure

Yew-Kwang Ng ()

Oxford Economic Papers, 1987, vol. 39, issue 2, pages 293-300

Abstract: The welfare of an individual depends not only on his own income but also on his income relative to that of others. A private good that he consumes yields him (intrinsic consumption and relative-income) utilities, but also imposes external costs on others through the relative-income effects. Expenditure on public goods not only produces intrinsic consumption utilities but also indirect relative-income utilities by reducing private expenditure. Since this indirect effect is unlikely to be adequately accounted for, the "optimal" level of public expenditure estimated by the conventional SMRS 3 MRT is really suboptimal. Copyright 1987 by Royal Economic Society.

Date: 1987
View citations in EconPapers

Downloads: (external link)
http://links.jstor.org/sici?sici=0030-7653%2819870 ... 0.CO%3B2-H&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:oup:oxecpp:v:39:y:1987:i:2:p:293-300

Ordering information: This journal article can be ordered from
http://www.oup.co.uk/journals

Access Statistics for this article

Oxford Economic Papers is edited by A. Banerjee and James Forder

More articles in Oxford Economic Papers from Oxford University Press
Address: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Series data maintained by Christopher F. Baum ().