Utility Functions,Public Goods,and Income Redistribution

Abstract

The results of fiscal incidence studies depend upon the underlying utility functions pertinent to the distribution of public good benefits among income classes. Generally, the use of such functions is not explicitly recognized. By taking, in the first instance, an extended approach to utility based on an original Aaron-McGuire formulation and, in the second instance, a new approach, it is concluded that the income-equalizing tendencies of fiscal activities may be overstated when more conventional analysis is employed.