Public goods and Pigouvian taxes
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Date
2006-07Metadata
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- Discussion papers (SAM) [673]
Abstract
This paper consists of the text of two articles prepared for the second edition of the New
Palgrave Dictionary of Economics. The first article provides a mathematical and
diagrammatic exposition of the theory of public goods as originally formulated by Samuelson.
It describes the extension of the model to take account of the costs of distortionary taxation,
and discusses the concept of the marginal cost of public funds. Different types of public goods
(such as mixed goods and local and global public goods) are discussed before turning to a
survey of the incentive problems related to preference revelation. The second article considers
the use of taxes designed to correct for negative external effects. It sets out the basic
theoretical argument and considers the modifications that have to be made when these taxes
are seen in the context of an otherwise distortionary tax system. It also briefly considers the
issue of the ‘double dividend’ from a green tax reform.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2006:23