TY - JOUR

T1 - Optimal Provision of Public Goods

T2 - A Synthesis

AU - Kreiner, Claus Thustrup

AU - Verdelin, Nicolaj

N1 - JEL Classification: H11;H23;H41

PY - 2012

Y1 - 2012

N2 - The standard approach to the optimal provision of public goods highlights the importance of distortionary taxation and distributional concerns. A new approach neutralizes distributional concerns by adjusting the income tax schedule. We demonstrate that both approaches are derived from the same basic formula. We also take the new approach further by deriving an intuitive formula for the optimal level of public goods, without imposing strong assumptions on preferences. This formula shows that distortionary taxation has a role to play, as in the standard approach. However, the main determinants of optimal provision are different, and the modified Samuelson rule is likely to lead to underprovision

AB - The standard approach to the optimal provision of public goods highlights the importance of distortionary taxation and distributional concerns. A new approach neutralizes distributional concerns by adjusting the income tax schedule. We demonstrate that both approaches are derived from the same basic formula. We also take the new approach further by deriving an intuitive formula for the optimal level of public goods, without imposing strong assumptions on preferences. This formula shows that distortionary taxation has a role to play, as in the standard approach. However, the main determinants of optimal provision are different, and the modified Samuelson rule is likely to lead to underprovision

U2 - 10.1111/j.1467-9442.2011.01686.x

DO - 10.1111/j.1467-9442.2011.01686.x

M3 - Journal article

VL - 114

SP - 384

EP - 408

JO - Scandinavian Journal of Economics

JF - Scandinavian Journal of Economics

SN - 0347-0520

IS - 2

ER -