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Public Provision of Private Goods and User Charges

Published online by Cambridge University Press:  17 August 2016

Alessandro Balestrino
Alessandro Balestrino*
Affiliation:
Università di Pisa
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Summary

This paper deals with the question whether uniform provision of a purely private good should be implemented at the social optimum, in a second best economy where personalised lump-sum transfers are not feasible, but no market failure exists. The answer is that it depends on the balance of private and social gains and losses from public provision: necessary conditions for the optimality of uniform provision are derived and discussed. The sensitivity of these conditions to changing rules for the choice of the user charge is also investigated, and it is suggested that public provision is most likely to be optimal when it is free of charge. Finally, it is emphasized that the assumption that a perfect substitute for the publicly provided good is not available plays a crucial role in obtaining the above results.

Résumé

Résumé

Cet article pose la question de savoir si la production uniforme d’un bien privé pur doit être réalisée au niveau correspondant à l’optimum social, dans dans le cadre d’une économie de second rang, où les transferts forfaitaires sont irréalisables, mais où le marché ne présente aucune défaillance. La réponse est que cela dépend de l’équilibre entre gain (pertes) privés et sociaux engendrés par une production publique. Les conditions nécessaires au caractère optimal de la production uniforme sont dégagées et discutées. La sensibilité de ces conditions au changement des règles de choix du mode de contribution sont également explorés. Il est suggéré que la production publique est plus que vraisemblablement optimale lorsqu’il y a absence de tarif. Enfin, il est mis en évidence que l’hypothèse d’absence de substitut au bien privé produit publiquement conditionne fortement de tels résultats.

Keywords

H42.H42.
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 61 , Issue 4 , 1995 , pp. 461 - 477
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1995 

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Footnotes

(*)

I would like to thank A. Cigno and A. Petretto for their comments on previous drafts of this paper. All errors are mine.

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