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Optimal provision of public inputs in a second best scenario

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      <subfield code="a">After obtaining the optimality rules for the provision of publics inputs, a numerical simulation is carried out to compute the level of public spending in each scenario. We find that a second-best rule has to be followed when lump-sum taxes are not available, even though the labor taxes are set optimality. Another result we obtain is that the level of public input provided under the second best escenario is higher than that corresponding to the first best outcome. The effect of changes to some parameters on the level of public input is also studied</subfield>
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