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The Distributive Implications of Indivisible Goods

Author: Dan Usher
Published in PFM, Vol. 9 No. 2

An indivisible good is an ideal type with interesting properties and strong implications about public policy. It is a good - such as a heart transplant or a treatment for AIDS - that must be consumed in a fixed amount or not at all. The community’s demand curve for an indivisible good is a rotation of the distribution of income. Monopolization of ordinary goods can be expected to reduce everybody’s consumption; monopolization of indivisible goods knocks out low-income consumers. Deadweight loss from monopolization has a distinct distributional aspect best captured in a utility-weighted measure. Indivisible goods are strong candidates for public provision and for the expropriation of patents.

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