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A Theory of Child Targeting

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Author Info
Olivier Bargain () (University College of Dublin, CHILD and IZA)
Olivier Donni () (Université de Cergy-Pontoise, THEMA, CIRPEE and IZA)

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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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Publisher 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
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Handle: RePEc:iza:izadps:dp2669

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

Other versions of this item:

Find related papers by JEL classification:
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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  1. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April. [Downloadable!] (restricted)
  2. Gronau, Reuben, 1991. "The Intrafamily Allocation of Goods--How to Separate the Adult from the Child," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 207-35, July. [Downloadable!] (restricted)
  3. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Sam Allgood & Arthur Snow, 1998. "The Marginal Cost of Raising Tax Revenue and Redistributing Income," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1246-1273, December. [Downloadable!] (restricted)
  5. Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May. [Downloadable!] (restricted)
    Other versions:
  6. Sutherland, Holly & Piachaud, David, 2001. "Reducing Child Poverty in Britain: An Assessment of Government Policy 1997-2001," Economic Journal, Royal Economic Society, vol. 111(469), pages F85-101, February. [Downloadable!] (restricted)
  7. Edmonds, Eric, 2002. "Reconsidering the labeling effect for child benefits: evidence from a transition economy," Economics Letters, Elsevier, vol. 76(3), pages 303-309, August. [Downloadable!] (restricted)
  8. Schroyen, Fred, 2005. "An alternative way to model merit good arguments," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 957-966, June. [Downloadable!] (restricted)
  9. Besley, Timothy J & Kanbur, S M Ravi, 1988. "Food Subsidies and Poverty Alleviation," Economic Journal, Royal Economic Society, vol. 98(392), pages 701-19, September. [Downloadable!] (restricted)
  10. Ted Bergstrom, 1989. "A Fresh Look at the Rotten Kid Theorem--And Other Household Mysteries," University of California at Santa Barbara, Economics Working Paper Series 1989A, Department of Economics, UC Santa Barbara. [Downloadable!]
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  11. Keen, Michael, 1992. "Needs and Targeting," Economic Journal, Royal Economic Society, vol. 102(410), pages 67-79, January. [Downloadable!] (restricted)
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  12. Peter Kooreman, 2000. "The Labeling Effect of a Child Benefit System," American Economic Review, American Economic Association, vol. 90(3), pages 571-583, June. [Downloadable!] (restricted)
  13. Christiansen, Vidar, 1983. " Some Important Properties of the Social Marginal Utility of Income," Scandinavian Journal of Economics, Blackwell Publishing, vol. 85(3), pages 359-71.
  14. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361. [Downloadable!] (restricted)
  15. Blow, Laura & Walker, Ian & Zhu, Yu, 2006. "Who benefits from Child Benefit?," The Warwick Economics Research Paper Series (TWERPS) 749, University of Warwick, Department of Economics. [Downloadable!]
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  16. Richard Dickens & David T Ellwood, 2003. "Child Poverty in Britain and the United States," Economic Journal, Royal Economic Society, vol. 113(488), pages F219-F239, 06. [Downloadable!] (restricted)
  17. Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994. "Optimal non-linear income taxation for the alleviation of income-poverty," European Economic Review, Elsevier, vol. 38(8), pages 1613-1632, October. [Downloadable!] (restricted)
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  18. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-29, February. [Downloadable!] (restricted)
  19. Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April. [Downloadable!] (restricted)
  20. Haddad, Lawrence & Kanbur, Ravi, 1992. "Intrahousehold inequality and the theory of targeting," European Economic Review, Elsevier, vol. 36(2-3), pages 372-378, April. [Downloadable!] (restricted)
    Other versions:
  21. 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, vol. 13(6), pages 721-746, December. [Downloadable!] (restricted)
  22. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January. [Downloadable!] (restricted)
  23. repec:fth:prinin:468 is not listed on IDEAS
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