Economics, Econometrics and Finance
4 years ago

Public Provision of Private Goods Can Achieve First-Best Allocation Goals

Hannover Economic Papers (HEP)
Relative Consumption, Optimal Taxation and Public Provision of Private Goods
Tobias Koenig, Tobias Lausen

Paper Summary

Public provision of private goods can be beneficial for efficiency when people care about how their consumption compares to others. Governments can help by providing certain goods to balance out excessive spending on status items. This can lead to the best allocation of resources and make consumption taxes unnecessary in some cases.

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