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The Benefit Incidence of Consumption Public Goods

University of Connecticut, Georgetown University

This article offers a total benefits approach to measuring the incidence of government expenditures as an alternative to equating benefits to Lindahl taxes. The procedure begins by decomposing each government program into its categories of benefits (or characteristies), which include (1) transfer, (2) productivity enhancements, and (3) public consumption benefits. The next step is to assess the benefit incidence of each category individually. The main result of this article, whieh focuses on the last category, is that the incidence ofpure consumption public goods is inversely related to their income elasticity of demand. The result follows from the definition of benefits and because these goods definitionally enter the utility function in a separable manner. Empirical estimates of the income elasticity of several programs confirms the plausibility of the separability property and the existence of different incidence types among the public goods, and thereby disproves the contention that the Lindahl taxes are the universal benefit taxes.

Public Finance Review, Vol. 15, No. 2, 138-165 (1987)
DOI: 10.1177/109114218701500202


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