The Second‐Best Level of a Public Good: An Approach Based on the Marginal Excess Burden

Timothy Gronberg () and Liqun Liu

Journal of Public Economic Theory, 2001, vol. 3, issue 4, 431-453

Abstract: This paper studies the second‐best level of public goods, a topic first addressed formally by Atkinson and Stern (1974, Review of Economic Studies, 41, 119–128). It goes beyond the existing literature on this “level problem” by identifying the marginal excess burden as a key underlying force behind level comparisons. The propositions in this paper include previous results as special cases. The paper also relates the marginal excess burden condition to consumer behavior and to the complementarity or substitutability between the public good and the taxed private good.

Date: 2001
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