Efficiency in the Optimum Supply of Public Goods.
HARVARD UNIV CAMBRIDGE MASS
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This paper is concerned with the question under what circumstances is the optimum allocation of expenditures between various public goods unaffected by a certain decentralization of decision making. Specifically, when can the relative optimum levels of public goods be determined without information concerning the effects on the equilibrium quantities of the specific taxes used to finance their production. It is shown that for this to hold for arbitrary taxes, it is necessary and sufficient that the partial derivative of the demand of each private taxable good with respect to the vector of quantities of public goods be proportional to the marginal utility of the vector of quantities of public goods. It is also shown that the assumption of optimum taxation widens considerably the possibilities for independent optimum expenditure and tax decisions. Author
- Economics and Cost Analysis
- Government and Political Science
- Numerical Mathematics