Bundling Private Complements to Finance Public Goods

Abstract

The U.S. National Park Service and other agencies argue that our recreation lands face a crisis of deferred maintenance. This article evaluates two proposals for funding public lands: increasing gate fees and taxing recreational gear. It analyzes the joint welfare effects of such taxes and the services supported by the revenue. It shows that when the taxed goods and the public service are weak complements, there is a simple, sufficient statistic determining whether the joint effect increases welfare for both consumers and sellers: the quantity demanded for the taxed good increases. We illustrate these results with data for recreational services. (JEL H41, Q51)