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A Theory of Child Targeting

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  • Bargain, Olivier

    ()
    (University of Aix-Marseille II)

  • Donni, Olivier

    ()
    (University of Cergy-Pontoise)

Abstract

There is a large empirical literature on policy measures targeted at children but surprisingly very little theoretical foundation to ground the debate on the optimality of the different instruments. In the present paper, we examine the merit of targeting children through two general policies, namely selective commodity taxation and cash transfer to family with children. We consider a household that comprises an adult and a child. The household behavior is described by the maximization of the adult’s utility function, which depends on the child’s welfare, subject to a budget constraint. The relative effects of a price subsidy and of a cash benefit on child welfare are then derived. In particular, it is shown that ‘favorable’ distortions from the price subsidies may allow to redistribute toward the child. The framework is extended to account for possible paternalistic preferences of the State. Finally, it is shown that, in contrast to the traditional view, well-chosen subsidies can be more cost effective than cash transfers in alleviating child poverty.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2669.

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Length: 32 pages
Date of creation: Mar 2007
Date of revision:
Publication status: published as 'Targeting and Child Poverty´' in: Social Choice and Welfare, 2011, [Online First]
Handle: RePEc:iza:izadps:dp2669

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Related research

Keywords: paternalism; social welfare; targeting; intrahousehold distribution; child benefit; commodity taxation; labeling;

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References

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  1. Edmonds, Eric, 2002. "Reconsidering the labeling effect for child benefits: evidence from a transition economy," Economics Letters, Elsevier, Elsevier, vol. 76(3), pages 303-309, August.
  2. Laura Blow & Ian Walker & Yu Zhu, 2012. "Who Benefits From Child Benefit?," Economic Inquiry, Western Economic Association International, vol. 50(1), pages 153-170, 01.
  3. Besley, Timothy J & Kanbur, S M Ravi, 1988. "Food Subsidies and Poverty Alleviation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(392), pages 701-19, September.
  4. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
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  6. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  7. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  8. Haddad, Lawrence & Kanbur, Ravi, 1991. "Intrahousehold inequality and the theory of targeting," Policy Research Working Paper Series 789, The World Bank.
  9. Michael Michael Keen, 1991. "Needs and Targeting," Working Papers, Queen's University, Department of Economics 822, Queen's University, Department of Economics.
  10. Sam Allgood & Arthur Snow, 1998. "The Marginal Cost of Raising Tax Revenue and Redistributing Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(6), pages 1246-1273, December.
  11. Gregg, Paul & Waldfogel, Jane & Washbrook, Elizabeth, 2006. "Family expenditures post-welfare reform in the UK: Are low-income families starting to catch up?," Labour Economics, Elsevier, Elsevier, vol. 13(6), pages 721-746, December.
  12. Kanbur, R. & Keen, M. & Tuomala, M., 1990. "Optimal Non-Linear Income Taxation for the Alleviation of Income Poverty," The Warwick Economics Research Paper Series (TWERPS) 368, University of Warwick, Department of Economics.
  13. Peter Kooreman, 2000. "The Labeling Effect of a Child Benefit System," American Economic Review, American Economic Association, American Economic Association, vol. 90(3), pages 571-583, June.
  14. Sutherland, Holly & Piachaud, David, 2001. "Reducing Child Poverty in Britain: An Assessment of Government Policy 1997-2001," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(469), pages F85-101, February.
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  16. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics, University of Munich, Department of Economics 3411, University of Munich, Department of Economics.
  17. Gronau, Reuben, 1991. "The Intrafamily Allocation of Goods--How to Separate the Adult from the Child," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(3), pages 207-35, July.
  18. Schroyen, Fred, 2005. "An alternative way to model merit good arguments," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 957-966, June.
  19. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, Elsevier, vol. 35(3), pages 355-369, April.
  20. Christiansen, Vidar, 1983. " Some Important Properties of the Social Marginal Utility of Income," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 85(3), pages 359-71.
  21. repec:fth:prinin:468 is not listed on IDEAS
  22. Gronau, Reuben, 1988. "Consumption Technology and the Intrafamily Distribution of Resources:," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(6), pages 1183-1205, December.
  23. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 57(225), pages 119-29, February.
  24. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, Elsevier, vol. 2(4), pages 357-361.
  25. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1138-59, October.
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Cited by:
  1. Marcella Veronesi & Martina Menon & Federico Perali, 2007. "Extensions of the Traditional Travel Cost Model of Non-Market Valuation to a Collective Framework: Evidence from the Field," Working Papers 42/2007, University of Verona, Department of Economics.

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