Public Expenditures Determined by Voting with One's Feet and Public Choice
by
David E. Wildasin Department of Economics University of Illinoois at Chicago Circle Chicago, Illinois 60680 USA
Abstract
This paper analyzes the nature of individual demands for local public goods in a model developed by Negishi. It is shown that under certain circumstances ("full equilibrium") a household's demand is determined by marginal benefit and tax-price as orthodox theory would suggest; under other circumstances, however, households will support "fiscally profitable" (property-value-enhancing) expenditure proposals. Thus on occasion -but not always- the fiscal profitability rule is politically viable. It is also shown that in full equilibrium, if Negishi's condition on preferences is satisfied, marginal benefit and tax-price are equated for every household and a Lindahl solution obtains.
