The Marginal Cost of Funds With Nonseparable Public Spending

Shaghil Ahmed and Dean Croushore

Public Finance Review, 1996, vol. 24, issue 2, 216-236

Abstract: This article provides new calculations of the welfare effects of fiscal changes when the publicly provided good is nonseparable in utility and production so that it affects economic agents' marginal decisions. The authors' results show that these nonseparabilities significantly alter the marginal cost of funds ( MCF ) that previous studies have calculated. The authors also report estimates of the nonseparable marginal benefits ( NSMB ) associated with aggregate government purchases. The net marginal cost offunds ( NMCF ), which is equal to MCF - NSMB, is in general positive over a wide range of parameter values that encompass empirically relevant specifications. Thus the nonseparable benefits by themselves are not sufficient for a marginal increase in aggregate government purchases of goods and services to be worthwhile.

Date: 1996
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Related works:
Working Paper: The marginal cost of funds with nonseparable public spending (1994)
Working Paper: The marginal cost of funds with nonseparable public spending (1992)
Working Paper: The Marginal Cost of Funds with Nonseparable Public Spending (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:24:y:1996:i:2:p:216-236

DOI: 10.1177/109114219602400206

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