When Does Majority Rule Supply Public Goods Efficiently?
- Author(s): Bergstrom, Ted
- et al.
H.R. Bowen showed that if voters have equal tax shares and if marginal rates of substitution are symmetrically distributed, then majority voting leads to efficient provision of public goods. These conditions are not likely to apply in a community with asymmetric income distribution. This paper defines a new idea for public goods allocation, a "pseudo-Lindahl equilibrium" which combines majority voting with tax rates that depend on income and other observable characteristices in such a way that the majority rule outcome is Pareto optimal for an interesting class of societies. The informational requirements for implementing pseudo-Lindahl are much less stringent than those required for an ordinary Lindahl equilibrium.