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The Desirability of In-Kind Transfers in the Presence of Distortionary Taxes

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  • Balestrino, Alessandro

Abstract

A standard argument in welfare economics maintains that private goods should not be publicly provided, because cash transfers are always superior to in-kind transfers. However, this conclusion does not hold in second best economies. A strong case for the desirability of in-kind transfer in the presence of distortionary taxes has been made in various recent contributions. Here, we survey the arguments provided in these papers, using a common theoretical framework which enables us to present more clearly the similarities and the differences among the various papers. The use of a common formal model helps us to show how the rationale for public provision of private goods is sensitive to the form of the tax system. It also helps us to provide an explanation why mandatory and non-mandatory in-kind transfer schemes have the same effects on social welfare. Finally, we offer some considerations on the relevance of the theory of in-kind transfers for policy action. Copyright 1999 by Blackwell Publishers Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economic Surveys.

Volume (Year): 13 (1999)
Issue (Month): 4 (September)
Pages: 333-54

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Handle: RePEc:bla:jecsur:v:13:y:1999:i:4:p:333-54

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Cited by:
  1. Alessandro Balestrino, 2000. "Mixed Tax Systems and the Public Provision of Private Goods," International Tax and Public Finance, Springer, vol. 7(4), pages 463-478, August.
  2. Balestrino, Alessandro, 1999. " User Charges as Redistributive Devices," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 511-24.
  3. Callan, Tim & Keane, Claire, 2009. "Non-cash Benefits and the Distribution of Economic Welfare," The Economic and Social Review, Economic and Social Studies, vol. 40(1), pages 49-71.
  4. Zohal Hessami & Claudio Thum & Silke Uebelmesser, 2012. "A Political Economy Explanation for In-kind Redistribution: The Interplay of Corruption and Democracy," Working Paper Series of the Department of Economics, University of Konstanz 2012-25, Department of Economics, University of Konstanz.
  5. Luciano G. Greco, 2011. "Optimal Redistribution with Productive Social Services," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 55-73, 03.
  6. Anne Emblem, 2002. "Redistribution at the Hospital," International Tax and Public Finance, Springer, vol. 9(4), pages 367-378, August.
  7. Simona GRASSI, 2006. "On the characteristics of a mixed system of provision of a private good. An application to health care," Departmental Working Papers 2006-14, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  8. Zanola, Roberto, 2000. "Public goods versus publicly provided private goods in a two-class economy," POLIS Working Papers 12, Institute of Public Policy and Public Choice - POLIS.
  9. Joan Esteban & Laura Mayoral, 2013. "A Politico-Economic Model of Public Expenditure and Income Taxation," Working Papers 743, Barcelona Graduate School of Economics.
  10. Anderberg, Dan, 1999. "Determining the mix of public and private provision of insurance by majority rule," European Journal of Political Economy, Elsevier, vol. 15(3), pages 417-440, September.
  11. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.

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