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Two Approaches to Determine Public Good Provision Under Distortionary Taxation

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  • Christiansen, Vidar

Abstract

The paper argues that the appropriate approach to determine public good provision financed by distortionary taxes should depend on the available tax regime. If a sufficiently rich tax regime exists, one could rely on the Pareto criterion, which would be less information–demanding than a social welfare approach requiring access to social welfare weights assigned to various groups. The discussion is related to a number of representative tax regimes and cost–benefit approaches in the literature. It is also argued that, whatever the available tax regime, cost–benefit analysis runs into problems unless one can assume that taxes are set optimally.

Suggested Citation

  • Christiansen, Vidar, 2007. "Two Approaches to Determine Public Good Provision Under Distortionary Taxation," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(1), pages 25-43, March.
    • Handle: RePEc:ntj:journl:v:60:y:2007:i:1:p:25-43
    DOI: 10.17310/ntj.2007.1.02
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    Cited by:

    1. Geir H. M. Bjertnæs, 2020. "The marginal (opportunity) cost of public funds," Discussion Papers 925, Statistics Norway, Research Department.
    2. Bjart J. Holtsmark & Katinka Kristine Holtsmark, 2021. "The Cost of Public Funding with Direct and Indirect Taxation - a Revisit," CESifo Working Paper Series 8907, CESifo.
    3. James E. Anderson & Will Martin, 2011. "Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 289-309, April.
    4. Ming Chung Chang & Shufen Wu, 2011. "Should Marginal Cost of Public Funds include the Revenue Effect?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(I), pages 1-16, March.
    5. Liqun Liu & Andrew J. Rettenmaier & Thomas R. Saving, 2021. "Discounting Environmental Benefits for Future Generations," Public Finance Review, , vol. 49(1), pages 41-70, January.
    6. Åsmund Sunde Valseth & Katinka Holtsmark & Bjart Holtsmark, 2019. "The costs of taxation in the presence of inequality," Discussion Papers 908, Statistics Norway, Research Department.
    7. Geir H. M. Bjertnæs, 2018. "The marginal cost of public funds in large welfare state countries," Discussion Papers 879, Statistics Norway, Research Department.
    8. Claus Thustrup Kreiner & Nicolaj Verdelin, 2012. "Optimal Provision of Public Goods: A Synthesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 384-408, June.
    9. Claus Thustrup Kreiner & Nicolaj Verdelin, 2008. "Optimal Provision of Public Goods: A Synthesis," EPRU Working Paper Series 08-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    10. Ming Chung Chang & Hsiao-Ping Peng & Yan-Ching Ho, 2016. "The Social Marginal Cost Curve and a Corner Solution of the Second-Best Level of Public Good Provision: A Review and an Extension," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 152(3), pages 209-241, July.
    11. Arwiphawee Srithongrung & Isaac S nchez-Ju rez, 2015. "Fiscal Policies and Subnational Economic Growth in Mexico," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 11-22.
    12. Geir Bjertnaes, 2015. "Social Security Transfers and the Marginal Cost of Public Funds," CESifo Working Paper Series 5689, CESifo.
    13. Bjart Holtsmark, 2019. "Is the marginal cost of public funds equal to one?," Discussion Papers 893, Statistics Norway, Research Department.
    14. Hoel, Michael, 2008. "Environmental Taxes in an Economy with Distorting Taxes and a Heterogeneous Population," Memorandum 04/2008, Oslo University, Department of Economics.
    15. Ming Chung Chang & Hsiao-Ping Peng & Yan-Ching Ho, 2016. "The Social Marginal Cost Curve and a Corner Solution of the Second-best Level of Public Good Provision: A Review and an Extension," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 152(III), pages 209-241, September.
    16. Ming Chang & Hsiao-Ping Peng, 2012. "Laffer effect, gross substitution, marginal cost of public funds and the level property of public good provision," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 650-659, October.

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