Abstract
This paper presents an algorithm for computing approximations to a certain subset of Pareto optimal allocations in a public goods economy. Consumers are partitioned into a number of exogenous governmental jurisdictions, which provide public goods locally and raise revenue to cover their costs by means of a proportional wealth tax. The Pareto optimal allocations studied are consistent with profit maximization on the part of producers, and utility maximization over private goods bundles subject to after-tax budget constraints by consumers. The computational routine is based on the Scarf algorithm for computing fixed points.
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The origins of this research date back to the Dartmouth Workshop on “Applications to economics of new methods of computing fixed points”, held during the summer of 1972 under the direction of H. Scarf. The author wishes to thank the participants in this workshop for many stimulating discussions. Also the provision of computer time by the Computer Research Center of the National Bureau of Economic Research is gratefully acknowledged. FIXPOINT, an interactive computer system developed at the Computer Research Center, was used in performing the numerical computations presented in the paper.
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Richter, D.K. The computation of a general equilibrium in a public goods economy. Mathematical Programming 14, 186–207 (1978). https://doi.org/10.1007/BF01588965
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DOI: https://doi.org/10.1007/BF01588965