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Basic Needs: Paternalistic Government Welfare Policy with Distortionary Taxation

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  • Thomas D. Birch

Abstract

This article analyzes government welfare policy in a general equilibrium setting with distortionary taxation. Government welfare policy is in accordance with the preferences of donor-taxpayers who want the consumption-leisure bundle of recipients to satisfy “basic needs.†The main focus is on the optimal level of employment for a destitute welfare recipient from the donor-taxpayer's perspective. This optimal level depends on the distortionary cost of taxation, whether the donor regards leisure or work as a basic “need,†and the distribution of the recipient's income if work is required. It is argued that donor appropriation of income resulting from mandatory recipient work in the private sector is not necessarily superior to either letting recipients retain their income or having the government appropriate the recipient's income from mandatory public sector employment.

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  • Thomas D. Birch, 1987. "Basic Needs: Paternalistic Government Welfare Policy with Distortionary Taxation," Public Finance Review, , vol. 15(3), pages 298-321, July.
    • Handle: RePEc:sae:pubfin:v:15:y:1987:i:3:p:298-321
    DOI: 10.1177/109114218701500304
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    References listed on IDEAS

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