When Does Majority Rule Supply Public Goods Efficiently?

Abstract

H.R. Bowen showed that majority voting leads to a Pareto efficient supply of a single public good if all voters have equal tax shares and if marginal rates of substitution for the public good are symmetrically distributed in the voting population. In general however, even if preferences are identical and tax shares equal, majority voting is not Pareto efficient if income is asymmetrically distributed. Here we formalize and generalize Bowen’s theorem. In the process we propose a new idea of a public goods allocation system, a “pseudo-Lindahl equilibrium”. Though it is Pareto efficient for an interesting class of societies, the informational requirements for implementing pseudo-Lindahl equilibrium are considerably less stringent than those for a true Lindahl equilibrium.

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