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Toward an efficiency rationale for the public provision of private goods

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  • Hanming Fang
  • Peter Norman
Abstract
Public provision of a private goods is justified on efficiency grounds in a model with no redistributive preferences. A government’s involvement in the provision of a private good generates information about preferences that facilitates more efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is always fulfilled under independence and satisfied for an open set of joint distributions. The efficiency gains require that consumers cannot arbitrage the publicly provided private good, so our analysis applies to private goods where it is easy to keep track of the ultimate user, such as schooling and health care, but not to easily tradable consumer goods. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    • Handle: RePEc:spr:joecth:v:56:y:2014:i:2:p:375-408
    DOI: 10.1007/s00199-013-0790-y
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. One rationale for the public provision of public goods
      by Economic Logician in Economic Logic on 2009-02-28 01:33:00

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    More about this item

    Keywords

    Publicly provided private goods; Constrained efficiency; Optimal taxation; D61; D82; H42;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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