Analysing and evaluating the taxpayer's demand for merit goods: the case of public sector education and health in Mauritius1

Abstract

This paper analyses the average taxpayer's demand for merit goods, namely, education and health, in Mauritius, a small developing island state. To study these development-related goods, a fresh methodology is employed that captures the characteristics of the Mauritian economy. The empirical evidence relates to the post-independence period of more than three decades, 1973 to 1999 and beyond. The respective demand elasticities for each merit good are analysed and evaluated. The findings indicate that, contrary to the conventional theory of demand, beneficiaries tend to demand more of such goods when their prices are increased, and less when they are decreased. The rationale for this behaviour is that people, in general, and taxpayers, in particular, being quality conscious, increase their demand when they are asked to pay more, expecting in return an improvement in the quality of services. However, there is evidence that over these three decades users' preferences have shifted, particularly in the case of education, towards private provision, indicating less reliance on public sector provision, and that during the years of structural adjustments the demand for these services was severely suppressed. 1This paper emanates from a research project undertaken by the author and which was fully sponsored by the Research and Consultancy Centre of the University of Mauritius in the year 2000.