PUBLIC PROVISION OF PRIVATE GOODS IN DEVELOPING COUNTRIES

Parkash Chander

The Singapore Economic Review (SER), 2016, vol. 61, issue 03, 1-13

Abstract: In this paper, we characterize optimal redistributive taxes and subsidies on a discrete good which is available in different qualities. We assume that utility function of each consumer is such that his willingness-to-pay for quality increases with income. This separates the rich and the poor through the quality levels of the good actually purchased by them and allows the government to tax the rich and subsidize the poor. It is shown that the deadweight loss associated with the optimal policy may be zero. The notion of a consumer equilibrium introduced in the paper suggests a method for estimating the quality of a good as perceived by the consumers.

Keywords: Self-selection; discrete goods; product quality; redistribution; deadweight loss (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S0217590816400166

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