© Copyright, Princeton University Press. No part of this book may be
distributed, posted, or reproduced in any form by digital or mechanical
means without prior written permission of the publisher.
Contents
Introductionxi
Prefacexxvii
Introductory Note to the 1980 Edition
xxix
P A R T O N E T H E A N A LY S I S O F P O L I C Y
Lecture 1 Introduction: Public Economics
1–­1 Introduction
1–­2 Role of the Government
1–­3 Guide to the Lectures
Note: The Public Sector—­Statistical Background
3
3
4
8
12
Lecture 2 Household Decisions, Income Taxation, and Labour Supply
19
2–­1 Introduction
19
2–­2 Income Taxation and Labour Supply
26
2–­3 Broader Models of Labour Supply
36
2–­4 Empirical Evidence on Labour Supply
40
2–­5 Concluding Comments
47
Note on the Expenditure Function
48
Reading50
Lecture 3 Taxation, Savings, and Decisions over Time
51
3–­1 Intertemporal Decisions and Taxation
51
3–­2 The Basic Intertemporal Model
56
3–­3 Developments of the Model and Alternative Views
66
3–­4 Empirical Evidence—­Taxation and the Interest Elasticity of Savings
74
3–­5 Concluding Comments
77
Reading78
Lecture 4 Taxation and Risk-­Taking
79
4–­1 Risk-­Taking and Portfolio Allocation
79
4–­2 Effects of Taxation
85
4–­3 Special Provisions of the Tax System
91
4–­4 Generalization of Results
96
4–­5 Concluding Comments
102
Note on Risk Aversion
103
Reading104
Lecture 5 Taxation and the Firm
5–­1 Taxes and the Firm
5–­2 Corporation Tax and the Cost of Capital
5–­3 Taxation and Investment
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105
105
108
117
viii ■
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distributed, posted, or reproduced in any form by digital or mechanical
means without prior written permission of the publisher.
C ontents
5–­4 A Wider View of Investment
123
5–­5 Empirical Investigation of Taxation and Investment
127
5–­6 Concluding Comments
130
Reading131
Lecture 6 Tax Incidence: Simple Competitive Equilibrium Model
132
6–­1 Introduction: Tax Incidence
132
6–­2 Static Two-­Sector Model
136
6–­3 Incidence of Corporation Tax
142
6–­4 General Tax Incidence
147
6–­5 Incidence in a Two-­Class Economy
155
6–­6 Numerical Applications of the Model
159
6–­7 Concluding Comments
163
Note on the Cost Function
164
Reading165
Lecture 7 Tax Incidence: Departures from the Standard Model
166
7–­1 Introduction
166
7–­2 Market Imperfections
167
7–­3 Monopolistic Competition
172
7–­4 Structure of Production
180
7–­5 Non-­Market-­Clearing
184
7–­6 Concluding Comments
188
Reading188
Lecture 8 Taxation and Debt in a Growing Economy
189
8–­1 Introduction
189
8–­2 An Aggregate Model of Equilibrium Growth
191
8–­3 Growth and Taxation
197
8–­4 Taxation in a Life-­Cycle Model
202
8–­5 Burden of the National Debt
208
8–­6 Concluding Comments
214
Reading215
Lecture 9 Distributional Effect of Taxation and Public Expenditure
216
9–­1 Taxation, Spending, and Redistribution
216
222
9–­2 Modelling the Distribution of Income
9–­3 Distributional Incidence
231
9–­4 Empirical Studies of the Redistributive Impact of the Government
Budget235
9–­5 Concluding Comments
244
Reading245
Lecture 10 Theories of the State and Public Economics
246
10–­1 Introduction
246
10–­2 Voting and Decisions
250
10–­3 Administration and Bureaucracies
259
10–­4 Power, Interest Groups, and Marxist Theories
263
10–­5 Empirical Studies of Public Expenditure
268
Reading274
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© Copyright, Princeton University Press. No part of this book may be
distributed, posted, or reproduced in any form by digital or mechanical
means without prior written permission of the publisher.
C ontents •
ix
P art T w o T h e D es i g n o f P o l i c y
Lecture 11 Introduction to Part Two: Normative Analysis
277
11–­1 Introduction
277
11–­2 Normative Theories of the State
279
11–­3 Pareto Efficiency and Welfare Economics
285
11–­4 Standard Public Finance Objectives
291
11–­5 Range of Government Instruments
296
Note on the Measurement of Income Inequality
302
Reading303
Lecture 12 The Structure of Indirect Taxation
304
12–­1 Introduction
304
12–­2 The Ramsey Tax Problem
308
313
12–­3 Application of the Ramsey Results
12–­4 Partial Welfare Improvements and Tax Reform
318
12–­5 Optimal Taxation in a Many-­Person Economy
322
12–­6 Concluding Comments
327
Reading327
Lecture 13 The Structure of Income Taxation
328
13–­1 Introduction
328
13–­2 A Simple Model
331
13–­3 Linear Income Tax
338
13–­4 General Income Tax
343
13–­5 Concluding Comments
352
Reading353
Lecture 14 A More General Treatment of the Optimal Tax Problem
354
14–­1 Introduction
354
14–­2 Indirect Taxes and Linear Direct Taxation
357
14–­3 Nonlinear Tax Schedules and Tax Exemptions
364
14–­4 Taxation of Savings
370
14–­5 Externalities in Consumption and Corrective Taxes
378
14–­6 Concluding Comments
381
Reading382
383
Lecture 15 Public Sector Pricing and Production
15–­1 Introduction
383
15–­2 Departures from Marginal Cost Pricing
386
15–­3 Choice of Technique and Production Efficiency
394
15–­4 Cost–­Benefit Analysis and Social Rate of Discount
398
15–­5 Concluding Comments
402
Reading403
Lecture 16 Public Goods and Publicly Provided Private Goods
404
16–­1 Introduction
404
16–­2 Optimum Provision of Pure Public Goods—­Efficiency
408
16–­3 Optimum Provision of Pure Public Goods—­Distribution
415
16–­4 Publicly Provided Private Goods
417
16–­5 Equilibrium Levels of Public Expenditure
424
16–­6 Revelation of Preferences
430
Reading434
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x ■
© Copyright, Princeton University Press. No part of this book may be
distributed, posted, or reproduced in any form by digital or mechanical
means without prior written permission of the publisher.
C ontents
Lecture 17 Local Public Goods
435
17–­1 Introduction
435
17–­2 Optimum Provision of Local Public Goods
437
17–­3 Market Equilibria and Optimality: Identical Individuals
446
17–­4 Market Equilibria and Optimality: Heterogeneous Individuals
452
17–­5 Fiscal Federalism
461
Reading465
Lecture 18 Public Economics: Theory and Policy
18–­1 On the Sources of Disagreement in Policy Analysis
18–­2 Thinking about Policy: Taxation
18–­3 Thinking about Policy: Expenditures
18–­4 Policy Reform and Political Economy
466
466
470
476
479
Bibliography481
Author Index
509
Subject Index
513
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