Publicly Provided Private Goods and Redistribution: A General Equilibrium Analysis

Abstract

Public provision of private goods is examined within a self‐selection framework where production depends on labour supply of different households and the level of public provision. It is shown that productivity and wage‐structure effects can create a role for public provision, even if preferences are weakly separable between goods and leisure. Public provision of education may offer an intuitively appealing case for the production‐side impacts. We also address the reasons for public provision in a dynamic, overlapping generations economy, whereby public provision may affect efficiency and social costs of redistribution of future generations as well. JEL classification: H23; H42