The Marginal Cost Of Public Funds Is The Ratio Of Mean Income To Median Income

Dan Usher

No 1011, Working Paper from Economics Department, Queen's University

Abstract: The marginal cost of public funds is the equilibrium price at the intersection of the appropriately-defined demand curve for and the supply curve of public expenditure. In a world with identical people and with no excess burden of taxation, that price would have to be 1. Otherwise the median voter's choice of a demogrant - or of its opposite, a head tax - fixes the marginal cost of public funds at the ratio of the mean income to the median income. A proof of this assertion is presented not for its realism, but because it calls attention to the interaction of the different influences upon the marginal cost of public funds.

Keywords: Marginal; Cost; of; Public; Funds (search for similar items in EconPapers)
JEL-codes: H4 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2002-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1011.pdf First version 2002 (application/pdf)

Related works:
Journal Article: The Marginal Cost of Public Funds Is the Ratio of Mean Income to Median Income (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1011

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