User Charges as Redistributive Devices

Alessandro Balestrino

Journal of Public Economic Theory, 1999, vol. 1, issue 4, 511-524

Abstract: In this model, a mix of public and private provision of private goods arises naturally in the economy. We characterize the social optimum in the presence of a linear tax/public expenditure system and show how a user charge can be welfare‐ or Pareto‐improving, when the users are the poor. The charge discourages the rich from opting into the public program and allows the policymaker to restructure the tax/expenditure system in a way that is beneficial for the poor. If the ensuing welfare gain is large enough to outweigh the loss for the remaining users, a charge is desirable.

Date: 1999
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