2008), “Toward an Efficiency Rationale for the Public Provision of Private Goods,” National Bureau of Economic Research Working Paper 13827

We show that public provision of private goods may be justified on pure efficiency grounds. A government’s involvement in the provision of the private good generates information about individuals ’ private good purchases that facilitates more efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is always fulfilled under independence and satisfied for an open set of joint distributions. The efficiency gains from public provision of private goods require that consumers cannot arbitrage, so our analysis applies to private goods where it is easy to keep track of the ultimate user, such as schooling and health care, but not to easily tradable consumer goods