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Merit goods and excise taxation in quasilinear markets for complementary private consumption

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  • Gerasimos T. Soldatos

    (American University of Athens, Athens, Greece)

Abstract

This paper models merit goods such as education and health, in a Lindahl-Foley environment in which public goods may be treated as private ones since merit goods are public goods that could have been provided privately. It does so in terms of a Levitan-Shubik quasilinear quadratic utility from complementary commodities and uniform taxation of non-merit commodities to finance the provision of merit goods. This analytical framework serves best the purpose of characterizing the general equilibrium. Complementarity is found to serve as an engine for increased output after the introduction of taxation, with a higher volume of private goods, lower tax rate, and minimal price for the merit goods at the new equilibrium.

Suggested Citation

  • Gerasimos T. Soldatos, 2020. "Merit goods and excise taxation in quasilinear markets for complementary private consumption," Public Sector Economics, Institute of Public Finance, vol. 44(4), pages 551-566.
    • Handle: RePEc:ipf:psejou:v:44:y:2020:i:4:p:551-566
    DOI: 10.3326/pse.44.4.6
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    References listed on IDEAS

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    More about this item

    Keywords

    merit goods; complementarity; quasilinear quadratic utility; excise taxation;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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