It is often argued that the use of distortionary taxation lowers the optimal provision of public goods below its optimal level in a first-best economy, which contains no restrictions on lump-sum taxation. However, this issue is usually investigated using commodity-tax models that contain no lump-sum taxes. This paper examines a many-consumer economy in which the only tax instruments are commodity taxes and a poll tax (subsidies are negative taxes). The optimal level of public good provision in this economy typically exceeds the first-best level, at least for distributionally neutral public goods. Copyright 1991 by American Economic Association.

Trade in a Tiebout EconomyThis paper explores both the positive and normative aspects of interregional commodity trade in a "Tiebout e conomy, " i.e., a many-region economy with perfect labor mobility and endogenous government decision making. For a model with scale econom ies in public good consumption, it is shown that any equilibrium is a symmetric; regions containing the same types of individuals and production possibilities nevertheless differ in the traded goods which they produce and the public-good levels which they provide residents. In fact, each region specializes in producing only one of the traded private goods. The paper proves that an equilibrium is Pareto efficient. Copyright 1987 by American Economic Association.

taxed. Considerable effort has been devoted to characterizing the manner in which the optimal tax rates differ across the taxable commodities.' But the literature has rarely addressed the issue of which commodities should be included in the tax base. In fact, the standard optimal tax model cannot provide a useful answer to this question, because it does not contain any of the resource costs normally associated with the collection of taxes, an omission that seriously diminishes the policy relevance of the model.2