The Public and Private Provision of Pure Public Goods and the Distortionary Effects of Income Taxation: A Political Economy Approach

18 Pages Posted: 15 Nov 2006

See all articles by Jun-ichi Itaya

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management

Albert G. Schweinberger

University of Konstanz - Faculty of Economics and Statistics

Abstract

A pure public good is provided by the government and the voluntary contributions of two types of households. The government finances its contribution by means of income taxation. The latter has distortionary effects. A third type of household never makes contributions. We analyse the effects of changes in the income tax rate on (a) the provision of the public good, (b) the private contributions of the households, and (c) changes in the distribution of income and welfare between contributing and non-contributing households. We derive a simple and testable condition under which the lowering of the income tax entails a Pareto improvement.

Suggested Citation

Itaya, Jun-ichi and Schweinberger, Albert G., The Public and Private Provision of Pure Public Goods and the Distortionary Effects of Income Taxation: A Political Economy Approach. Canadian Journal of Economics, Vol. 39, No. 3, pp. 1023-1040, August 2006, Available at SSRN: https://ssrn.com/abstract=944953 or http://dx.doi.org/10.1111/j.1540-5982.2006.00380.x

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management ( email )

Sapporo 060-0809
Japan

Albert G. Schweinberger (Contact Author)

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany
++49 7531 88-2632 (Phone)
++49 7531 88-4119 (Fax)

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