Public Choice

, Volume 74, Issue 2, pp 133–152 | Cite as

Government subsidies to private spending on public goods

  • Russell D. Roberts


This paper examines how the size of an efficient subsidy varies with the amount of free-riding and the presence of distorting taxation. Ironically, the existence of free-riding, where some individuals make no voluntary contribution at all, reduces the size of an efficient subsidy and makes a subsidy more attractive compared to direct taxation. For the gain to be significant, the number of donors must be extremely few in number. Even when the gains from a subsidy relative to direct taxation are small, a subsidy may dominate direct taxation because it can reveal an efficient level of the public good.

The analysis distinguishes between traditional public goods such as national defense, and what I call transfer public goods, where members of society care about the consumption of a particular group in society such as the poor. I generalize the Samuelson (1954) results to derive conditions for efficiency in providing transfer public goods.


Public Good Public Finance Efficient Level Society Care Government Subsidy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Kluwer Academic Publishers 1992

Authors and Affiliations

  • Russell D. Roberts
    • 1
  1. 1.Olin School of BusinessWashington University in St. LouisSt. Louis

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