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Optimal Redistribution with Productive Social Services
Author(s) -
Greco Luciano G.
Publication year - 2011
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2010.01642.x
Subject(s) - redistribution (election) , exploit , economics , productivity , public good , welfare , public economics , public spending , goods and services , productive efficiency , labour economics , social welfare , microeconomics , production (economics) , market economy , economic growth , computer security , politics , political science , computer science , law
Publicly‐provided private goods are conventionally considered consumer goods. Departing from this perspective, we analyze the public provision of inputs that improve household productivity (e.g., education and childcare). In a two‐class economy with distorting taxation, public provision is always welfare improving with respect to pure taxation, given that the public input directly affects household productivity. Moreover, the case for public provision strengthens as households' heterogeneity in input demand fades out, contrary to consolidated results in the literature. The features of optimal provision schemes depend on the nature of publicly provided input, namely, if it substitutes household productive capacity or just helps households to exploit it.