Abstract
This paper derives the optimal method of financing and level of provision
of an excludable public good when political and economic jurisdictions
coincide, and when they differ. The objective of a central planner in the
jurisdiction providing the good is to maximize the social welfare of residents
of the jurisdiction. The central planner can collect taxes from residents
only, but may collect entrance fees from residents and non-residents alike.
Four cases are examined: (1) the political and economic jurisdictions coincide,
(2) the political jurisdiction contains, but is larger than the economic
jurisdiction, (3) the economic jurisdiction contains, but is larger than
the political jurisdiction, and (4) the economic and political jurisdictions
overlap. For each case, the optimal mix of taxes and fees is derived.