Adaptation, Taxation, and Public Goods

Thomas Aronsson () and Ronnie Schöb ()
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Thomas Aronsson: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Ronnie Schöb: School of Business and Economics, Postal: Freie Universität Berlin, D–14195 Berlin, Germany
Authors registered in the RePEc Author Service: Ronnie Schoeb

No 902, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper shows how the first-best and second-best rules for optimal public good provision depend on the adaptation to private and public consumption. Adaptation in private consumption typically leads to over-provision relative to the Samuelson condition, while adaptation in public consumption works the other way around. The two sources of adaptation only cancel out in the extreme case of full adaptation.

Keywords: Public goods; adaptation; habit-formation; optimal taxation (search for similar items in EconPapers)
JEL-codes: D03 D60 H21 H41 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2014-12-09
New Economics Papers: this item is included in nep-pbe and nep-pub
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