Econometrica: Nov, 1970, Volume 38, Issue 6

Public Goods and Income Distribution

https://doi.org/0012-9682(197011)38:6<907:PGAID>2.0.CO;2-4
p. 907-920

Henry Aaron, Martin McGuire

Hitherto, studies of the impact of government taxation and expenditure on the distribution of national income or product among income classes have used arbitrary rules of thumb for the distribution of the benefits from pure public goods or bads. This article demonstrates the logically correct method for distribution of these public good benefits. Application of this method requires information on consumer preferences for public goods; since this information is unavailable, we illustrate the application of the method to the 1961 United States income distribution by showing how various distributions would result from various consumer preference structures.