Public goods versus publicly

provided private goods in a two-class economy*

by

Roberto ZanolaDepartment of Public Policy and Public Choice - Polis

Corso Borsalino, 50 – 15100 Alessandria - ItalyE-mail: zanola@sp.unipmn.it

ABSTRACT: The two-type model of non-linear income taxation with asymmetric information on individualability levels is extended to discuss welfare effects of two policy instruments: a pure public good and apublicly provided private good. This latter is interpreted as health care. Three different cases are analysed:\when each policy instrument is used in turn and when they are jointly used. The publicly provided privategood is proved to be welfare enhancing when it is used as the only policy instrument. By contrast, in the mixedcase, the publicly provided private good acts as a lump-sum transfer to all individuals.

JEL: H41, H51, I18.Key Words: Health Care; Optimal Taxation; Welfare; Mixed Goods

* This paper has benefited from helpful discussions with R.Aaberge, G.Brosio, M.Ferrero, C.Marchese, A.M.Jones and U.Panizza. Theusual disclaimer applies.

1 Introduction

A nextensiveeconomicliteratureexistsontheprovisionofpublicgoodsby

theprivatesector[B ergstrom etA l.., 19 86;A ndreoni, 19 8 8]. B ycontrast, the

reversequestionofthepublicprovisionofprivategoodswas oddlyneglected

untilrecentyears, withtheexceptionofsomepioneeringcontributions.

Two di¤erentapproaches have been developed to address this question

[Boadwayand M archand, 19 9 5;B lomquistandChristiansen, 19 9 9 ]. T he…rst

is representedbythepublicchoicemodels, whichexaminetheinteractionbe-

tweenvoterdemandandthesupplyofpubliclyprovidedprivategoods. Inthis

approach, thequantityofpubliclyprovidedprivategoodsisdeterminedbythe

medianvoter’schoiceand, consequently, taxes aresetatthelevelrequiredto

…nanceit. Inordertobere-elected, thegovernmentis forcedtomaximisethe

medianvoter’sutilityfunction, sinceherepresents thedecisivevoter[M eltzer

andR ichard, 19 81;U sher, 19 7 7 ;W ilsonandKatz, 19 83;Pauly, 19 9 2;G ouveia,

19 9 6, 19 9 7 ;EppleandR omano, 19 9 6a, 19 9 6b;G lomm andR avikumar, 19 9 8].

T hesecondapproach is representedbynormativemodels, whichfocus on

thee¢ciencyenhancingroleofpubliclyprovidedprivategoods. A ccordingto

this literature, inthepresenceofdistortionarytaxes thereis astrongcasefor

thedesiderabilityofin-kindtransfers insteadofmonetarytransfers1.

T hebasicideaofthisliteratureisthatpubliclyprovidedgoodscanbeused

as adevicetoselectincomegroups, sincethegovernmentcannotobservethe

individuals’ incomes. Ifrich individuals prefertoconsumehigherquality(or

quantity) ofagoodsuchashealthcare, thegovernmentcanredistributefrom

high-incometolow-incomeindividualsbyprovidingthisgoodpublicly. Publicly

providedprivategoodsofrelativelylowqualityallowthelow-incomeindividuals1Forasurveyoftheliterature, seeB alestrino(19 9 9 ).

1

toconsumethesegoodsforfree, whilehigherincomeindividualswillconsume

them intheprivatemarket. Boadwayand M archand (19 9 5), B lomquistand

Christiansen(19 9 5, 19 9 8a, 19 9 8b), CremerandG ahvari (19 9 7 ), andBoadway,

M archandand Sato(19 9 8) studypublicprovisionofprivategoods in atwo-

typemodelwith self-selection constraints. M orerecently, T hum and T hum

(19 9 9 )examinehowredistributionthroughpublicprovisionofprivategoodscan

beextendedtothecaseofrepeatedinteractions betweenthegovernmentand

transferrecipients. H owever, allthesemodels donotincludepublicprovision

ofapublicgood. B y contrast, BoadwayandKeen (19 9 3) give an excellent

accountofpublicprovisionofapublicgoodinatwo-typesmodelwithoptimal

non-linearincometax, buttheirmodelis still incomplete since itdoes not

includepublicprovisionofaprivategood.

T hepurposeofthispaperistogeneralisethislatterapproach, byinvestigat-

inghowthesimultaneousprovisionofbothapublicgoodandapubliclypro-

videdprivategoodcanimprovethee¢ciencyofredistributionwithinamodelof

optimalnon-linearincometaxationwithasymmetricinformationonindividual

abilitylevels.

T heremainderofthepaperisorganisedasfollows. Section2 describesthe

basicmodel. Section3analyseswelfaree¤ects ofpublicgoodprovisionwhen

the levelofpublicly provided privategood is given. Section 4 analyses the

oppositecaseinwhichthelevelofpublicgoodis given. Section5 focuses on

themixedscheme, wherebothpolicyinstruments areused. Someconclusions

aredrawninSection6.

2

2 Thebasicmodel

Consideraneconomyconsistingoftwotypes ofindividuals, characterisedby

twodi¤erentindexes, w1 andw2;withw2 > w1 . T he variablewi maybe

thoughtofas thewagerateoras ability, buttheanalysis is generalisablein

thisrespect. Informationaboutabilityandsuppliedhoursoflabourisprivate

informationnotavailabletothegovernment, whichcanonlyobservetotalindi-

vidualincome. Inthis setting, thegovernmentcannotimposelump-sum taxes

conditionalonability. Insteadaredistributionschememustbedesignedsubject

toan informationconstraintinordertopreventhigh-abilityindividuals from

mimickinglow-abilityindividuals. T hisoccurswhenthemoreableindividuals

masqueradeas low-abilityones byearningthesameincome. Inwhatfollows,

I willfocus onthe‘normal’caseinwhichthegovernmentredistributiongoes

from thehigh-abilitytothelow-abilityindividuals.

Intheeconomytherearefourcommodities: aprivategood, x;timespent

onwork, l;apurepublicgood, g;andamixedgood2 , z, whichisinterpretedas

healthcare. T hegovernmentprovidesthesamelevelofthepublicgood, g, toall

individuals, eveniftheymayvalueitdi¤erently. Italsoprovidessomeamount

ofhealthcare, h;uniformlytoallindividuals. Individualsmaysupplementit

bypurchasinghealthcareintheprivatemarket, s, buttheyarenotallowedto

tradesomeofthepubliclyprovidedquantity3, sothatz=h+ s;withs¸0 :I

assumex;g;z;andleisuretobenormalgoods. Furthermore, themixedgood

andleisureareassumedtobesubstitutes4, sinceanincreaseinleisureimplies2 A nearlyde…nitionofmixedgood is givenbyStiglitz (19 7 4): ‘...is aprivategood(agood

forwhichthereis asubstantialmarginalcostofanadditionalpersonconsumingit) which is

provided inequalquantities toallindividuals (withinagivenclass)’.3T his assumption is necessarytomakean in-kindtransferdistinguishablefrom atransfer

incash.4T his assumption is equivalenttoassumingthatthemarginalvaluationof z is increasing

3

adecreaseinthedemandforz, takingconsumerpricesanddisposableincome

asgiven[BoadwayandM archand, 19 9 5;BoadwayetA l.., 19 9 8].

T ypei’sbefore-taxincomeisYi=wili:Eachtype-i individualhasthesame

quasi-concaveandtwicedi¤erentiableutilityfunction:

U i(x;l;g;z)=U i(x;Ywi;g;zi) (1)

with@U i=@x> 0 ;@U i=@l< 0 ;@U i=@g> 0 ;and@U i=@z> 0 .

Each individualmaximises utilitybychoosingx;Y;and s subjecttothe

budgetconstraintY ¡T (Y )=x+ phs;whereT (Y )isanon-lineartax-function5

andph is thepriceofhealthcare, whilethepriceofxisnormalisedtoone.

FollowingChristiansen(19 84), I assumethattheindividual’s problem can

beanalysedasatwo-stageprocess. Inthe…rststage, hedecideshis supplyof

labour;inthesecond stage, heallocates his after-tax incomebetweenxand

s, conditionalonthebefore-taxincomewhichhasbeenearnedbysupplyingl.

Solvingbackward, atstagetwolabouristreatedas …xed. L etB i=Yi¡Ti be

theindividuali’s after-taxincome;bysubstitutingxi = B i¡phsi inequation

(1)andmaximisingwithrespecttosi, theindividual’sproblemmaybewritten

as:

M ax(si 0̧ )

U i(B i¡phsi;Yi;g;si + h) (2)

in labour, @M R Sixz =@li> 0 ;whereM R Sixz is themarginalrateofsubstitutionofx for z in

utilityfunction [B lomqvistandChristiansen, 19 9 8].5T hechoiceofnon lineartaxation is madetomaketheself-selectionconstrainte¤ective.

Infact, inthecaseoflinearincometaxation, ane¢cientredistribution is precluded[W ilson,

19 9 1].

4

T he…rst-orderconditionsyieldtheconditionaldemandfunction, si(ph;g;h;Yi;B i),

whichexpressesthedemandforgoodsconditionaluponthevalueofli.

A usefulpropertyoftheconditionaldemandfunctionsoccursforsi > 0 ;as

shown in B oadwayetA l.. (19 9 8): Supposeh is increasedwhen si > 0 . T he

changeinthedemandforzi maybebrokendownintotwoseparatee¤ects: an

incomee¤ectandasubstitutione¤ect. T heincomee¤ectmakestheindividual’s

overalldemandforzi increase;bycontrast, sincehandsi areassumedtobe

perfectsubstitutes, thesubstitutione¤ectreducesthedemandforsi, sothat:

@si@h

=phµ@si@B i

¶¡1 (3)

Substitutingtheconditionaldemand function forsi intotheutilityfunc-

tion U i(:)yieldstheindirectutilityfunction, whichrepresentstypei’sutility

functionwhenhis before- andafter-taxincomeis spentoptimally:

­ i(ph;g;h;Yi;B i)=U i [B i¡phsi(ph;g;h;Yi;B i);Yi;g;h+ si(ph;g;h;Yi;B i)]

(4)

T his can berepresented geometrically byan indi¤erencemap in (B i;Yi)

space, characterisedbythesingle-crossingproperty, inwhichlow-abilityindif-

ferencecurvesaresteeperthancurvesofhigh-abilityindividuals.

B yapplyingtheenvelopetheorem, from (4) itfollows:

­ iph=¡U ixsi; ­ ig=U i

g; ­ ih=U iz¡phU i

x; ­ iYi =U il

wi; ­ iB i =U i

x:

(5)

wherepartialderivativesareexpressedbyappropriatesubscripts.

5

A tthe …rststageofthe individual’s maximisation, he has todecidethe

supplyofhoursoflabour, or, whichisequivalent, thecombinationofbefore- and

after-taxincome, tomaximise(4). Inthisrespect, thegovernment’schoiceofa

non-lineartaxschedulemaybeinterpretedastheo¤eringofthis combination

ofbefore- andafter-taxincometoindividuals.

Inwhatfollows, I focusonsecond-bestPareto-e¢cientsolutions, takingthe

objectofthegovernmenttobethemaximisationofasocialwelfarefunction,

de…nedastheweightedsum ofutilitiesofthetwoabilitytypes, subjecttothe

self-selectionconstraintforhigh-abilityindividualsandthegovernment’sbudget

constraint. I considerthecase inwhich redistribution is from high- tolow-

abilityindividualstotheextentthattheself-selectionconstraintisbinding. In

ordertopreventhigh-abilityindividualsfrommimickingthebefore-taxincome

oflow-abilityindividuals, aself-selectionconstrainthas been introduced: the

utilityoftype-twoindividualsfrombeinghonestmustbehigherthantheutility

associatedwithmimicking. Thegovernment’smaximisationproblem isde…ned

as:

M ax­ 1(ph;g;h;Y 1 ;B 1)+ ®­ 2(ph;g;h;Y2;B 2) (6)

subjectto:

­ 2(ph;g;h;Y2;B 2) ¸ ­m2(ph;g;h;Y 1 ;B 1) (7 )

n1 [Y 1 ¡B 1]+ n2 [Y2¡B 2] ¸ phh(n1 + n2)+ pgg (8)

where® representstheweightgiventothehigh-levelindividual’sutility;ni

isthenumberoftypei-individuals;andpg isthepriceofthepurepublicgood,

which is assumedtobe…xedbecauseofthelinearityofthetechnology. The

6

superscript‘m2’totherespectiveutilityfunctionsidenti…estype-twomimicking

individuals.

T hreepolicyinstrumentsareavailabletothegovernment: anon-linearin-

cometax, apurepublicgoodandapubliclyprovidedprivategood. Consider

…rsttheoptimalsecondbestnon-lineartaxation, whichisassumedtobealways

inplacehereafterwards. T he L agrangianforthegovernment’s maximisation

problem maybewrittenas:

L = ­ 1 (ph;g;h;Y 1 ;B 1)+ ®­ 2(ph;g;h;Y2;B 2)+

¯[­ 2(ph;g;h;Y2;B 2)¡­m2(ph;g;h;Y 1 ;B 1)]+

± [n1 (Y 1 ¡B 1 ¡phh)+ n2 (Y2¡B 2¡phh)¡pgg]

(9 )

where¯ and± aretheL agrangianmultipliersrespectivelyassociatedtothe

self-selectionconstraintandthegovernment’sbudgetconstraint. D i¤erentiating

(9 )withrespecttoB 1 ;y1 ;B 2;y2;yieldsthefollowingFO Cs:

@L@B 1

= U 1x¡¯U m2

x ¡±n1 =0 (10)

@L@y1

= U 1y ¡¯U m2

y ¡±n1 =0 (11)

@L@B 2

= (® + ¯)U 2x¡±n2 =0 (12)

@L@y2

= (® + ¯)U 2y ¡±n2 =0 (13)

T heserepresentthestandardconditionsforoptimaltaxationintheabsence

ofpublicgoods [Stiglitz, 19 82; BoadwayandKeen, 19 9 3]. Inparticular, fol-

lowingStiglitz (19 82), dividing(13) by(12), itfollows thatthemarginaltax

7

ratefacedbythemoreableindividualis zeroanddividing(11) by(10) that

themarginaltaxratefacedbythelessableindividualwillbepositive6. H ence,

themaximum levelofwelfareattainablethroughanon-linearincometaxsys-

tem, takinggandhasgiven, is constrainedbyself-selection. Inthis respect,

theuseofquantitycontrols canrelaxtheself-selectionconstraintandallows

thegovernmenttoimprovethee¢ciencyofredistributionasshowninthenext

sections.

6SeeStiglitz (19 8 2) foramoregeneralanalysis ofconditions (10)-(13).

8

3 Thewelfaree¤ectofthepurepublicgood

Considerthecase inwhich theamountofpublicly provided privategood is

given. D e…neW (g;h)themaximum valuefunctionforthegovernment’sopti-

malincometaxproblem. T hisrepresentsthevalueofsocialwelfareforagiven

amountofgandh. B yapplyingtheenvelopetheorem andusing…rst-order

conditions, we…ndthefollowingpropertyofW (g;h):

@W@g

=U 1g+ (® + ¯)U 2

g¡¯U m2g ¡±pg (14)

Fromwhichitfollows:

Proposition1 Foranyvalueofh,

@W@g

8>>><>>>:

>

=

<

9>>>=>>>;0 iff

Pi M R S igx

8>>><>>>:

>

=

<

9>>>=>>>;

hpg+

³¯Um2

x±

´¡M R Sm2

gx ¡M R S 1gx¢i

Proof. FollowingB oadwayandKeen(19 9 3), addingandsubtracting¯U m2x

³U 1gU 1x

´

to(14), andusing(10) and(12), itfollows:

@W@g

=X

i

M R S igx¡pg¡µ¯U m2

x

±

¶¡M R Sm2gx ¡M R S 1gx

¢(15)

FromwhichitiseasytocheckforProposition1

TogetfurtherintuitiononProposition1, considerthecaseinwhich, fora

givenvalueofh, theoptimalnon-linearincometaxandpublicgoodpolicyare

bothinplace. T hismeansassuminggasacontrolvariableinthegovernment’s

9

optimisationproblem(9 ), sothattheoptimalityconditionongimpliesequation

(15) equaltozero. W henthisoccurs, theSamuelsonrule- accordingtowhich

thesum ofthemarginalrateofsubstitutionoverallindividualsmustbeequal

tothemarginalrateoftransformation - is violatedwheneverthemimicker’s

marginalevaluationofthepublicgoodisgreaterorlowerthanthelow-ability’s

marginalevaluation. Inparticular, atsecondbestParetoe¢ciencyinthelevel

ofpublicgoodprovision, constrainedbyabindingself-selectionconstrainton

thehigh-abilityindividuals, anover-provision/under-provisionofpublicgoods

occurs ifthesum ofmarginalrates ofsubstitutionofgforx is lower/higher

thanthemarginalcost7 .

Consider…rstthecaseinwhich M R S 1gx> M R Sm2gx , thatis, atsecondbest

optimumthereisanover-productionofg(withrespecttothe…rstbestsolution).

FollowingBoadwayandKeen(19 9 3), startingatP

i M R S igx=pg, supposeto

increasegincrementally, and, simultaneously, toincreaseeachindividual’stax

liabilitybyhismarginalrateofsubstitutionofgforx:Sincethemimickerand

low-ability individuals facethe samebudgetconstraintand since M R S 1gx >

M R Sm2gx;themimickeris crowdedoutatalowervalueofgthanthevalueat

which low-ability individuals arecrowdedout. Furthermore, since B 2 > B 1

andY2 > Y 1 , andsince @g@B i > 0 and @g

@Yi > 0 ;themimickerisalsocrowdedout

beforehonesthigh-ability individuals. T he self-selection constrainton high-

ability individuals turns outtoberelaxed, sothatpublicgood provision is

welfareenhancing.

A similarargumentappliesforthecaseinwhich M R S 1gx< M R Sm2gx:W hen

this occurs, startingatP

i M R S igx = pg supposetoreduceg incrementally

and, atthesametime, tomodifythetaxstructure in suchawaythateach7 A s in B oadway and Keen (19 9 3), the concept ofover- and under-provision is merely

‘...shorthandforacentralcharacteristicofthesecond-bestoptimum’.

10

individual’staxliabilitydecreasesbyhismarginalrateofsubstitutionofgfor

x. L ikewise, themimickeris crowdedoutbeforeeitherlow-abilityandhigh-

abilityindividuals.

11

4 The welfare e¤ectofthe publicly provided

privategood

Considernowthecaseinwhichtheamountofpublicgoodisgiven. Byapplying

theenvelopetheoremandusing…rst-orderconditions, aftersomemanipulations

wegetthefollowingpropertyofW (g;h):

@W@h

=¡U 1z¡phU 1

x¢+ (® + ¯)(U 2

z¡phU 2x)¡¯ (U m2

z ¡phU m2x )+

¡±ph·1 ¡ph

µ@si@B i

¶+@si@h

¸(16)

whereh1 ¡ph

³@si@B i

´+ @si

@h

iis thecompensatede¤ecton si:From (16) it

follows:

Proposition2Foranyvalueofg, ifzisasubstituteforleisure, anincrease

inthelevelofthepubliclyprovidedgoodiswelfareenhancing.

Proof. B ysubstituting(10) and(12) into(16)andrearranging, wehave:

@W@h

= ±·n1

¡M R S 1zx¡ph

¢+ n2

¡M R S 2zx¡ph

¢+¯±U m2x

¡M R S 1zx¡M R Sm2

zx¢̧¡

¡±ph·1 ¡ph

µ@si@B i

¶+@si@h

¸(17 )

G iven1 ¡ph³@si@B i

´+ @si

@h =0 forsi > 0 ;byapplyingtheenvelopetheorem,

itfollowsthat@W@h > 0 i¤ :

¯±U m2x

¡M R S 1zx¡M R Sm2zx

¢> 0 (18)

12

Sincez is assumedtobeasubstituteforleisure, ifhigh-abilityindividuals

mimicklow-abilityindividualstheyconsumemoreleisurethanlow-abilityindi-

viduals, andconsequentlyless publiclyprovidedprivategood, sothatitmust

bethecasethatM R S 1zx> M R Sm22 :H ence, sinceU m2x > 0 ;followsProposition

2

T his resultstates thatiftheassumptiononthesubstituabilitybetweenz

andleisureholds, thenadditional(withrespectto…rst-bestoptimum) public

provisionofaprivategoodcanrelaxthehigh-abilityself-selectionconstraint.

A nalogouslytotheprevious section, hereI onlyconsiderthecaseinwhicha

singlepolicyinstrumentisused. Insodoing, thepurepublicgoodisassumedto

begiven, atleastequaltozero. T hisassumptionisrelaxedinthenextsection,

wherethemixedschemeisanalysed.

13

5 Thewelfaree¤ectsofthemixedscheme

In this section I focus onthemixed scheme, thatis, thecase inwhich both

apublicgoodandapubliclyprovidedprivategoodareused. Toinvestigate

the implications ofsuchascheme, considerthecase inwhich theyareused

optimally:

Proposition3 Inthecaseinwhichbothapurepublicgoodandapublicly

providedprivategoodareusedoptimally, if z isasubstituteforleisure, thenh

actsasanequallump-sum transfertoallindividuals.

Proof W henoptimalpurepublicgoodprovisionandoptimalprovisionof

publiclyprovidedgoodareboth inplace, theFO Cs alsoincludetheoptimal

conditiononthechoiceofh, sothatequation(16) mustbeequaltozero. By

applyingtheenvelopetheorem andgiven 1 ¡ph³@si@B i

´+ @si

@h =0 forsi > 0 , it

follows:

¯±U m2x

¡M R S 1zx¡M R Sm2zx

¢=0 (19 )

L ikewise, theoptimalconditiononthechoiceofgimplies equation(15) be

equaltozero. Solving(15) for ¯±U

m2x andsubstitutinginto(19 ) turns itinto

thecondition:

ÃM R S igx¡pg

M R Sm2gx ¡M R S 1gx

!¡M R S 1zx¡M R Sm2

zx¢=0 (20)

Consider…rstthecaseinwhich M R S igx6=pg. From Proposition1 wehave

thatthe…rstterm ontheL H S of(20) is positive, sothatM R S 1zx= M R Sm2zx ,

whichcorrespondstothecaseinwhichneitherlow- norhigh-abilityindividuals

14

northemimickerare crowded out, sothathworks as an equallump-sum

transfertoallindividuals. L ikewise, inthecaseinwhich M R S igx=pg, thatis,

thecaseinwhicha…rstbestsolutionoccursforthepurepublicgoodprovision,

equation (20) implies a…rstbestsolutionforapubliclyprovidedgood, thus

concludingtheproof

T hecaseofoptimaljointprovisionleaves openthe issueofhowtoredis-

tributeeconomicresources from thehigh-abilityindividualstothelow-ability

individuals, whichhasbeenanalysedthroughoutthispaper. Startingfromthe

caseofoptimaljointprovision, supposetoincreasehincrementallyand, atthe

sametime, tomodifythetaxstructure in suchawaythateach individual’s

taxliabilityincreasesbyhismarginalrateofsubstitutionofhforx. Sincethe

mimickerandlow-abilityindividualsfacethesamebudgetconstraintandsince

M R S 1zx > M R Sm2zx;themimickeris crowdedoutatalowervalueofhthan

thevalueatwhichlow-abilityindividualsarecrowdedout. Furthermore, since

B 2 > B 1 and Y2 > Y 1 , and since @si@B i > 0 and @si

@Yi > 0 as longas si is not

crowdedout, themimickerisalsocrowdedoutbeforehonesthigh-abilityindi-

viduals. T heself-selectionconstraintonhigh-abilityindividualsturnsouttobe

relaxed, sothatpubliclyprovidedprivategoodiswelfareenhancing. H owever,

inthespecialcaseinwhich M R S igx=pg, ifz is asubstituteforleisure, then

anincreaseinhis notwelfareenhancing.

15

6 Conclusions

T hetwo-typesmodelofnon-linearincometaxationwithasymmetricinforma-

tion on individualability levels is extended todiscuss welfaree¤ects oftwo

policyinstruments: apurepublicgoodandapubliclyprovidedprivategood.

T helatteris interpretedashealthcare.

T hreedi¤erentcasesareanalysed. W henthelevelofthepubliclyprovided

privategoodisgiven, anincreaseinthelevelofthepurepublicgoodprovision

maybewelfareenhancingifthelow-abilitymarginalrateofsubstitutionofg

forxishigherthanthemimicker’smarginalrateofsubstitution.

T hecase inwhichonlythepubliclyprovided privategood is considered,

giventheassumptionthatz isasubstituteforleisure, impliesthatanincrease

inthelevelofitiswelfareenhancingbyrelaxingtheself-selectionconstrainton

high-abilityindividuals.

B ycontrast, whenoptimalpurepublicgoodprovisionandoptimalprovi-

sionofpubliclyprovidedgoodarebothinplace, thislatteractsasalump-sum

transfertoallindividuals. H owever, itis stillpossibletoredistributeeconomic

resourcesfrom thehigh-abilityindividualstothelow-abilityindividualsbyin-

creasingthelevelofthepubliclyprovidedprivategoodaslongasanunder- or

anover-provisionofthepurepublicgood(comparedwiththe…rstbestopti-

mum)occurs.

A numberofissuesremainopenforfurtherresearch. A …rstissueistoallow

forpricinginstruments availabletothegovernmenttobeintroduced, suchas

aperunitsubsidyongoodz. FollowingB lomquistandChristiansen(19 9 9 ), a

second issuewouldbetheattempttomergethenormativeapproachandthe

publicchoiceapproachintoasinglemodeltoderiveconditions forane¢cient

choiceofdistributionalpolicywithinapoliticaleconomyframework.

16

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20

Working Papers

The full text of the working papers is downloadable at http://polis.unipmn.it/

* Economics series **political theory series

2000 n. 13* Roberto Zanola, Public goods versus publicly provided private goods in a two-class economy

2000 n. 12** Gabriella Silvestrini, Il concetto di <<governo della legge>> nella tradizionerepubblicana.

2000 n. 11** Silvano Belligni, Magistrati e politici nella crisi italiana.Democrazia dei guardiani e neopopulismo

2000 n. 10* Rosella Levaggi and Roberto Zanola, The Flypaper Effect: Evidence from theItalian National Health System

1999 n. 9* Mario Ferrero, A model of the political enterprise

1999 n. 8* Claudia Canegallo, Funzionamento del mercato del lavoro in presenza diinformazione asimmetrica

1999 n. 7** Silvano Belligni, Corruzione, malcostume amministrativo e strategie etiche. Ilruolo dei codici.

1999 n. 6* Carla Marchese and Fabio Privileggi, Taxpayers Attitudes Towaer Risk andAmnesty Partecipation: Economic Analysis and Evidence for the Italian Case.

1999 n. 5* Luigi Montrucchio and Fabio Privileggi, On Fragility of Bubbles inEquilibrium Asset Pricing Models of Lucas-Type

1999 n. 4** Guido Ortona, A weighted-voting electoral system that performs quite well.

1999 n. 3* Mario Poma, Benefici economici e ambientali dei diritti di inquinamento: ilcaso della riduzione dell’acido cromico dai reflui industriali.

1999 n. 2* Guido Ortona, Una politica di emergenza contro la disoccupazione semplice,efficace equasi efficiente.

1998 n. 1* Fabio Privileggi, Carla Marchese and Alberto Cassone, Risk Attitudes and theShift of Liability from the Principal to the Agent

Department of Public Policy and Public Choice “Polis”

The Department develops and encourages research in fields such as:

• theory of individual and collective choice;

• economic approaches to political systems;

• theory of public policy;

• public policy analysis (with reference to environment, health care, work, family, culture, etc.);

• experiments in economics and the social sciences;

• quantitative methods applied to economics and the social sciences;

• game theory;

• studies on social attitudes and preferences;

• political philosophy and political theory;

• history of political thought.

The Department has regular members and off-site collaborators from other private or public organizations.

Instructions to Authors

Please ensure that the final version of your manuscript conforms to the requirements listed below:

The manuscript should be typewritten single-faced and double-spaced with wide margins.

Include an abstract of no more than 100 words.

Classify your article according to the Journal of Economic Literature classification system.

Keep footnotes to a minimum and number them consecutively throughout the manuscript with superscript Arabic numerals.Acknowledgements and information on grants received can be given in a first footnote (indicated by an asterisk, notincluded in the consecutive numbering).

Ensure that references to publications appearing in the text are given as follows:COASE (1992a; 1992b, ch. 4) has also criticized this bias....and“...the market has an even more shadowy role than the firm” (COASE 1988, 7).

List the complete references alphabetically as follows:

Periodicals:KLEIN, B. (1980), “Transaction Cost Determinants of ‘Unfair’ Contractual Arrangements,” American Economic Review,70(2), 356-362.KLEIN, B., R. G. CRAWFORD and A. A. ALCHIAN (1978), “Vertical Integration, Appropriable Rents, and theCompetitive Contracting Process,” Journal of Law and Economics, 21(2), 297-326.

Monographs:NELSON, R. R. and S. G. WINTER (1982), An Evolutionary Theory of Economic Change, 2nd ed., Harvard UniversityPress: Cambridge, MA.

Contributions to collective works:STIGLITZ, J. E. (1989), “Imperfect Information in the Product Market,” pp. 769-847, in R. SCHMALENSEE and R. D.WILLIG (eds.), Handbook of Industrial Organization, Vol. I, North Holland: Amsterdam-London-New York-Tokyo.

Working papers:WILLIAMSON, O. E. (1993), “Redistribution and Efficiency: The Remediableness Standard,” Working paper, Center forthe Study of Law and Society, University of California, Berkeley.