Toward an Efficiency Rationale for the Public Provision of Private Goods

Peter Norman and Hanming Fang
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Peter Norman: UNC Chapel Hill

No 1185, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: This paper shows that public provision of private goods may be justified on pure efficiency grounds in an environment where individuals consume both public and private goods. The government's involvement in the provision of private goods provides it with information about individuals' private good purchases that facilitates more efficient revenue extraction for the provision of public goods. We show that public provision of the private good improves economic efficiency under a condition that is always fulfilled under stochastic independence and satisfied for an open set of joint distributions. Our model is an example where there is an efficiency loss from separating revenue and expenditure problems, and is therefore of more general interest for the study of optimal taxation.

Date: 2010
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Related works:
Journal Article: Toward an efficiency rationale for the public provision of private goods (2014)
Working Paper: Toward an Efficiency Rationale for the Public Provision of Private Goods (2008)
Working Paper: Toward an Efficiency Rationale for the Public Provision of Private Goods (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:1185

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