• DOI:10.1007/BF00140763
• Corpus ID: 154960626

Government subsidies to private spending on public goods

@article{Roberts1992GovernmentST,
  title={Government subsidies to private spending on public goods},
  author={Russell D. Roberts},
  journal={Public Choice},
  year={1992},
  volume={74},
  pages={133-152}
}

• R. Roberts
• Published 1 September 1992
• Economics
• Public Choice

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.