Template-Type:ReDIF-Paper 1.0  
Title:When Do Distortionary Taxes Reduce the Optimal Supply of Public 
     Goods?
Author-Name: Gaube, Thomas 
Classification-JEL:  H41, H21
Keywords:  public goods, distortionary taxation
Abstract: It is often argued that the optimal level of public good provision 
     is below the first-best level as long as the government's 
     expenditures have to be financed by distortionary taxes. I examine 
     this hypothesis and show that it is correct in a representative 
     consumer economy if (i) the public good is normal and (ii) private 
     commodities are normal and gross substitutes. Otherwise, 
     counterexamples can be constructed. These results hold also with 
     heterogeneous households provided that equity considerations are 
     ignored. In general, however, distributional objectives may lead to 
     a higher level of public expenditures in second best than in first 
     best. 
Length: pages
Creation-Date: 
Revision-Date: 1999-04
Handle: RePEc:bon:bonsfa:574