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A note on the optimal level of public inputs

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Abstract

This paper analyses whether the first-best level of public inputs exceeds the second-best level. On the basis of a simple model, we argue that the level of productivity-enhancing public expenditures is always higher than the level of public inputs provided with distortionary taxation.

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Authors and Affiliations

  1. Department of Economics, University Pablo Olavide, Seville, Spain

    Diego Martinez & A. Jesus Sanchez

Authors
  1. Diego Martinez
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  2. A. Jesus Sanchez
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Corresponding author

Correspondence to Diego Martinez.

Additional information

Previous versions of this paper were presented at the 60th Congress of IIPF, the XII and XIII Encuentro de Economia Publica. We are very grateful to H. Konishi, Associate Editor of Social Choice and Welfare, for his insighful comments, which completely changed the approach taken. The usual disclaimer applies. Both authors acknowledge financial support from the Spanish Institute for Fiscal Studies and the Spanish Ministry of Science (projects 2003-04028 and 2006-04803).

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Martinez, D., Sanchez, A.J. A note on the optimal level of public inputs. Soc Choice Welf 34, 363–369 (2010). https://doi.org/10.1007/s00355-009-0401-9

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  • DOI: https://doi.org/10.1007/s00355-009-0401-9

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