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We examine optimal taxation and public good provision by a government which takes reduction of envy into consideration as one of the constraints. We adopt the notion of extended envy-freeness proposed by Diamantaras and Thomson (1990), called lambda-equitability. Different from the existing paper by Nishimura (2003), this paper introduces public good provision by the government into his model, and analyzes both pure public good case and excludable public good case. Under the provision of pure public good, we show that distorting original Samuelson is desirable in order to relax the lambda-equitability as well as self-selection constraints. On the other hand, under the provisionof excludable public good, the effect of lambda-equitability appears not only the provision rule for public goods but also the pricing rule for user fees.
