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Macroeconomics Commons

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2008

Benefit-cost analysis

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Optimal Public Goods Provision: Implications Of Endogenizing The Labor/Leisure Choice, Nicholas E. Flores, Philip E. Graves Dec 2007

Optimal Public Goods Provision: Implications Of Endogenizing The Labor/Leisure Choice, Nicholas E. Flores, Philip E. Graves

PHILIP E GRAVES

Conventional analysis of public goods provision aggregates individual willingness to pay while treating income as exogenous, ignoring the fact that we generate income to allow us to purchase utility-generating goods. We explore the implications of endogenizing the lahor-leisure decision by explicitly considering leisure demand in a model of public goods provision. We consider benefit analysis of public goods provision and find that increments of the public good will generally be under-valued using conventional analysis while decrements to the public good (rare in public good settings) will be overvalued (JELC91,D61,Q5I)