A Dynamic Incentive-Based Argument for Conditional Transfers
AbstractWe compare the long-run e ects of replacing unconditional transfers to the poor by transfers conditional on the education of children. Unlike the Mirrlees income taxation model, the distribution of skill evolves endogenously. Human capital accumulation follows the Freeman-Ljungqvist-Mookherjee-Ray OLG model with missing capital markets and dynastic bequest motives. Conditional transfers (funded by taxes on earnings of the skilled) are shown to induce higher long run output per capita and (both utilitarian and Rawlsian) welfare, owing to their superior effect on skill accumulation incentives. The result is established both with two skill levels, and a continuum of occupations.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-170.
Length: 26 pages
Date of creation: Apr 2008
Date of revision:
Other versions of this item:
- Dilip Mookherjee & Debraj Ray, 2008. "A Dynamic Incentive-Based Argument for Conditional Transfers," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages S2-S16, 09.
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