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The purpose of this paper is to characterize that the marginal social cost of public funds and to estimate the response of labor supply to these publicly provided goods, and simulate the marginal social cost of cash‐cum‐in‐kind transfers (MSCKT) for Brazil.

The paper provides a theoretical model based on Wildasin to characterize the marginal social cost of public funds. Next it estimates using instrumental variables approach the variables necessary to calibrate our theoretical model.

The marginal social cost of public funds depends on the relation between labor supply and the cash‐cum‐in‐kind transfers. Last, the simulations suggest that MSCKT can increase up to 12.4 percent if compared with cases in which is assumed ordinary independence between labor and the bundle of goods provided by the public sector.

Further panel data experiments based on municipal public finance data should be conducted in order to circumvent the agents' heterogeneity problem inherent in cross section analysis – and individuals' labor supply response could be more sensitive at this data level. Finally, such cost‐benefit analysis makes more sense when a specific project is considered and therefore its effects on the taxed good can be clearly estimated leading to a more reliable estimative of the marginal social cost of funding that project.

Governments should take the actual social cost of public policies into consideration before undertaking any new project.

The paper is useful to characterize the marginal social cost of public funds, estimate the necessary parameters and, last, to calibrate its correspondent using Brazilian data.

Environmental economics has typically adopted two approaches to the demonstration of the optimal level of pollution. The first superimposes a marginal pollution cost (MPC) function on the traditional model of the profit maximising firm and demonstrates that Pareto optimality requires the output price to be set equal to marginal social cost (MSC), defined as the sum or marginal private cost (MC) and marginal pollution cost. The second looks at the marginal pollution cost and compares it to the marginal cost of pollution control (MPCC). The optimum in this approach then exists when marginal pollution cost equals marginal cost of pollution control.

The paper is devoted to the question of how to allocate a given educational budget. Alternative avenues of expenditure on post‐secondary education are treated as investment projects and their benefit‐cost ratios are compared. The analysis is essentially static and is based on two investigations carried out by the author, one in Canada, the other in the United Kingdom. The paper is organised into three sections. The first discusses the methodology underlying the two detailed studies. The second presents conclusions on particular aspects of the general problem of allocating resources within formal education, and is divided into four parts: the balance between private and social costs and benefits, between academic levels of education, between types of education and between male and female education. The final section of the paper contains four more general points and emphasises our ignorance in much of this area.

X = multiple interpretations