Public Goods and Income Distribution

Income inequality and willingness to pay for environmental public goods

“…We follow Aaron and McGuire (1970) and Ebert (2003) in defining the individual income-equivalent total WTP for the environmental good at level E as the willingness to pay w per unit (Lindahl price) times the total number E of units:…”

“…Ebert (2003), following up on previous work by Aaron and McGuire (1970), Kovenock and Sadka (1981), Kriström and Riera (1996), Flores and Carson (1997), has scrutinized the incidence of environmental benefits and has shown that the income elasticity of WTP for an environmental public good has an inverse relationship to the elasticity of substitution between a composite consumption good and the environmental good in question, assuming a constant-elasticity-of-substitution (CES) utility function. Hence, the income elastic-ity of WTP is smaller (greater) than unity if and only if the environmental good and consumption good are substitutes (complements).…”

Redistribution in Switzerland: Social cohesion or simple smoothing of lifetime incomes?

“…In this case, the allocation of the expenditures happens at the wrong time, distorting the effective benefits of households upwards (Aaron and McGuire, 1970). Similarly, the actual benefits of infrastructure facilities are underestimated if they were constructed in the past.…”

Taxation and Redistribution: Some Clarifications

“…See, for example, Aaron and McGuire (1970) and Ruggles and O'Higgins (1981). Nevertheless, presumably just about everyone, importantly including for present purposes lower-income individuals, benefits substantially from public goods and, as discussed below, the extent of this benefit presumably varies with the extent to which public goods are provided.…”