PROJECT EVALUATION RULES FOR THE PROVISION OF PUBLIC-GOODS RECONSIDERED

The theory of the provision of a public good with distortionary taxati on is reconsidered. We present sufficient conditions for the existence of a differentially strict Pareto improvement. With a small increase of a public good, if we can perturb indirect tax rates, we suggest the use of a Generalized Pigovian rule, which generalizes the cost-benefi t rule by Atkinson and Stern [1974] to a heterogeneous-consumers econo my. If we can perturb both indirect taxes and lump-sum transfers, we s uggest a Generalized Samuelsonian rule, and if we can perturb lump-sum transfers, we suggest a Modified Harberger-Bruce-Harris rule.