Abstract
Conventional analysis of public goods provision aggregates individual willingness to pay while treating income as exogenous, ignoring the fact that we generate income to allow us to purchase utility-generating goods. We explore the implications of endogenizing the labor/leisure decision by explicitly considering leisure demand in a model of public goods provision. We consider benefit analysis of public goods provision and find that increments of the public good will generally be under-valued using conventional analysis while decrements to the public good (rare in public good settings) will be overvalued. (JEL C91, D61, Q51)
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