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Repeated Interaction and the Public Provision of Private Goods

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  • Thum, Claudio
  • Thum, Marcel

Abstract

The literature suggests that governments can use in-kind transfers to design efficient and targeted redistribution schemes if individual incomes are not directly observable. We investigate the extent to which the self-selection property of in-kind transfers carries through if redistributive transfers are made repeatedly. In a two-period setting, the government may gain information about the individuals' incomes in the first period and exploit this information for making targeted transfers in the second-period. This, however, also triggers changes in the individuals' behavior. If the government can commit to its future policy, the least cost policy may involve randomization between cash and in-kind transfers. Without commitment, the dynamic setting works against the government's interest. It may no longer be able to use in-kind transfers to generate information about the individuals' types. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 103 (2001)
Issue (Month): 4 (December)
Pages: 625-43

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Handle: RePEc:bla:scandj:v:103:y:2001:i:4:p:625-43

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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  1. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  2. Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-67, December.
  3. Theodore C. Bergstrom & S�ren Blomquist, . "The Political Economy of Subsidized Day Care," ELSE working papers 015, ESRC Centre on Economics Learning and Social Evolution.
  4. Munro, Alistair, 1991. "The optimal public provision of private goods," Journal of Public Economics, Elsevier, vol. 44(2), pages 239-261, March.
  5. Alessandro BALESTRINO, 1995. "Public Provision of Private Goods and User Charges," Discussion Papers (REL - Recherches Economiques de Louvain) 1995043, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
  7. Munro, Alistair, 1992. "Self-Selection and Optimal In-Sind Transfers," Economic Journal, Royal Economic Society, vol. 102(414), pages 1184-96, September.
  8. Guesnerie, Roger & Roberts, Kevin, 1984. "Effective Policy Tools and Quantity Controls," Econometrica, Econometric Society, vol. 52(1), pages 59-86, January.
  9. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
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Citations

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Cited by:
  1. Thum, Marcel, 2004. "Korruption," Dresden Discussion Paper Series in Economics 11/04, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Iregui, Ana Maria, 2005. "Decentralised provision of quasi-private goods: The case of Colombia," Economic Modelling, Elsevier, vol. 22(4), pages 683-706, July.
  3. Margarita Katsimi & Thomas Moutos, 2004. "Monopoly, Inequality and Redistribution via the Public Provision of Private Goods," CESifo Working Paper Series 1318, CESifo Group Munich.
  4. Choi, Jay Pil & Thum, Marcel, 2003. "The dynamics of corruption with the ratchet effect," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 427-443, March.

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