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The Efficiency Case for Universality

Author

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  • Nicholas Rowe
  • Frances Woolley

Abstract

The authors compare universal social programs with targeted social benefits. They define 'universality' as separability of the tax/transfer system in income and other nonmonetary attributes, and introduce the concept of 'parallel equity'--a requirement that like differences in needs should be treated alike. The authors develop a model based on optimal tax theory that shows that under specified assumptions universality is efficient as well as equitable; departures from universality result in an inefficient structure of net marginal tax rates. Their key assumptions are that individual-specific needs necessitate a fixed exogenous monetary expenditure and that needs are exogenous, observable, and uncorrelated with other relevant variables. The authors then relax these assumptions and describe the limited circumstances under which departures from universality may be desirable.

Suggested Citation

  • Nicholas Rowe & Frances Woolley, 1999. "The Efficiency Case for Universality," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 613-629, May.
    • Handle: RePEc:cje:issued:v:32:y:1999:i:3:p:613-629
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    Cited by:

    1. Pierre Pestieau & Maria Racionero, 2015. "Tagging with leisure needs," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(4), pages 687-706, December.
    2. Stuart Adam, 2005. "Measuring the marginal efficiency cost of redistribution in the UK," IFS Working Papers W05/14, Institute for Fiscal Studies.
    3. Robin Boadway & Pierre Pestieau, 2006. "Tagging and redistributive taxation," Annals of Economics and Statistics, GENES, issue 83-84, pages 123-147.
    4. Eren Gürer & Alfons J. Weichenrieder, 2021. "Pro-rich Inflation and Optimal Income Taxation," Public Finance Review, , vol. 49(6), pages 815-844, November.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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