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Means-Tested versus Universal Transfers: Alternative Models and Value Judgements

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  • Creedy, John

Abstract

This paper illustrates the use of different criteria used to evaluate alternative tax and transfer systems. Means-tested and universal transfer systems are compared, using numerical examples involving a small number of individuals, in order to highlight the precise effects on incomes. The implications of fixed incomes and of endogenous incomes, using CES utility functions, are examined. Comparisons between tax systems involve fundamental value judgements concerning inequality and poverty, and no tax structure can be regarded as unambiguously superior to another. Judgements depend on the degree of inequality aversion and attitudes poverty. However, in cases where means-testing is preferred, the desired tax or taper rate applying to benefits is substantially less than 100 percent. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Creedy, John, 1998. "Means-Tested versus Universal Transfers: Alternative Models and Value Judgements," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(1), pages 100-117, January.
    • Handle: RePEc:bla:manch2:v:66:y:1998:i:1:p:100-117
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    Cited by:

    1. John Creedy, 2009. "Personal Income Taxation: From Theory to Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 496-506, December.
    2. John Creedy, 2010. "Personal Income Tax Structure: Theory and Policy," Chapters, in: Iris Claus & Norman Gemmell & Michelle Harding & David White (ed.), Tax Reform in Open Economies, chapter 7, Edward Elgar Publishing.
    3. Tom Kornstad & Thor O. Thoresen, 2004. "Means‐Testing the Child Benefit," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 29-49, March.
    4. John Creedy, 2008. "Choosing the tax rate in a linear income tax structure," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 11(3), pages 257-276.
    5. Alari Paulus, 2016. "The antipoverty performance of universal and means-tested benefits with costly take-up," ImPRovE Working Papers 16/12, Herman Deleeck Centre for Social Policy, University of Antwerp.
    6. Guyonne Kalb & Thor Thoresen, 2010. "A comparison of family policy designs of Australia and Norway using microsimulation models," Review of Economics of the Household, Springer, vol. 8(2), pages 255-287, June.
    7. John Creedy, 2007. "Choosing The Tax Rate in a Linear Income Tax Structure: An Introduction," Department of Economics - Working Papers Series 1006, The University of Melbourne.
    8. Rosanna Scutella, 2004. "Moves to a Basic Income-Flat Tax System in Australia: Implications for the Distribution of Income and Supply of Labour," Melbourne Institute Working Paper Series wp2004n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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