Are User Fees Really Regressive?
CESifo, Munich, 2012
CESifo Working Paper No. 3875
This paper studies the aggregate and distributional implications of introducing user fees for publicly provided excludable public goods into a model with consumption and income taxes. The setup is a neoclassical growth model where agents differ in earnings and second-best policy is chosen by a Ramsey government. Our main result is that the adoption of user fees by the Ramsey government not only increases aggregate efficiency, but it also decreases inequality. This result is in contrast to common view and policy practice.
Fiscal Policy, Macroeconomics and Growth
Public Finance