Chapter 12

Introduction to Second-Best Analysis

Abstract

Chapter 12 offers an introduction to Part III of the text, which analyzes public expenditure and tax theory under common second-best assumptions such as distorting taxes and private information. The chapter discusses the relative strengths and weaknesses of first and second-best analysis, provides an extended discussion of the effects of private information on public sector theory, and concludes with a brief introduction to behavioral economics.

Keywords

Expenditure theory; Private information; Second-best analysis; Tax theory; Underground (shadow) economy

Get Public Finance, 3rd Edition now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial