Public Goods in Open Economies with Heterogeneous Individuals

Joseph E. Stiglitz

NBER Working Paper No. 802 (Also Reprint No. r0433)
Issued in November 1983
NBER Program(s):   PE

This paper formulates a simple model of "perfect community competition." It is shown that (1) the equilibrium is Pareto optimal; (2) communities will, in general, be heterogeneous; not all individuals will have the same tastes; but (3) all individuals of a given skill within the community will have identical preferences; (4) in spite of the heterogeneity of tastes, there is complete unanimity with respect to tax and expenditure policy, and there is no scope for redistribution at the local level; (5) under certain circumstances, everyone's expected utility can be increased by introducing a particular kind of unequal treatment of individuals who are otherwise identical with respect to tastes and production characteristics; (6) when there is not "perfect community competition, " the equilibrium will, in general, not be Pareto optimal, and benefit taxation may be desirable.

(410 K)

(311 K)

Published: Stiglitz, Joseph E. "Public Goods in Open Economies with Heterogeneous Individuals." Locational Analysis of Public Facilities, edited by J.F. Thisse & H.G. Zoller, North Holland Publishing Company, (1983), pp. 55-78.

This paper is available as PDF (410 K) or DjVu (311 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX