On the optimal level of public inputs
Diego Martínez () and
Antonio Jesus Sanchez Fuentes ()
No 06.34, Working Papers from Universidad Pablo de Olavide, Department of Economics
This paper studies the optimal level of public inputs under two different tax settings. With this aim, we adapt the approach by Gronberg and Liu (2001) to the case of productivity-enhancing public spending. We find that it is not analytically clear whether the first-best level of public spending exceeds the second-best level. After taking account the type of public input, a wide numerical simulation has been carried out. We obtain that the second-best level is always below the first-best level but the criterion by Gronberg and Liu has to be qualified.
Keywords: Second best; excess burden; public input. (search for similar items in EconPapers)
JEL-codes: H21 H3 H41 H43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-12, Revised 2008-03
New Economics Papers: this item is included in nep-pbe
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http://www.upo.es/serv/bib/wps/econ0634.pdf First version, 2006 (application/pdf)
http://www.upo.es/serv/bib/wps/econ0634R.pdf Revised version, 2008 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:pab:wpaper:06.34
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