TY  - JOUR
AU  - Fang,Hanming
AU  - Norman,Peter
TI  - Toward an Efficiency Rationale for the Public Provision of Private Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13827
PY  - 2008
Y2  - February 2008
UR  - http://www.nber.org/papers/w13827
L1  - http://www.nber.org/papers/w13827.pdf
N1  - Author contact info:
Hanming Fang
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA 19104
Tel: 215-898-7767
Fax: 215-573-2057
E-Mail: hanming.fang@econ.upenn.edu

Peter Norman
Department of Economics
University of North Carolina at Chapel Hill
107 Gardner Hall
Chapel Hill, NC 27599-3305
E-Mail: normanp@email.unc.edu
AB  - This paper shows that public provision of private goods may be justified on pure efficiency grounds in an environment where individuals consume both public and private goods. The government's involvement in the provision of private goods provides it with information about individuals' private good purchases that facilitates more efficient revenue extraction for the provision of public goods. We show that public provision of the private good improves economic efficiency under a condition that is always fulfilled under stochastic independence and satisfied for an open set of joint distributions. Our model is an example where there is efficiency loss from separating revenue and expenditure problems in public finance, and is therefore of more general interest for the study of optimal taxation.
ER  -