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Can Equity and Efficiency Complement Each Other?

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Author Info
Rebecca M. Blank

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Abstract

Economists tend to assume that redistributive transfers increase equity but cause a loss in efficiency, the so-called 'leaky bucket' effect. This paper explores situations where efficiency losses are small or where equity and efficiency might even complement each other. A simple model identifies key parameters that cause leaky buckets and which policy can affect. Three situations are discussed where the equity/efficiency tradeoff may be low: When transfers go to populations with no capacity to change their behavior; when transfers go to programs that limit efficiency losses through behavioral requirements; and when commodities are subsidized that function as long-term investments and create future income gains.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8820.

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Date of creation: Feb 2002
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Handle: RePEc:nbr:nberwo:8820

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D3 - Microeconomics - - Distribution
I3 - Health, Education, and Welfare - - Welfare and Poverty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Blank, Rebecca M, 2000. "When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services," Economic Journal, Royal Economic Society, vol. 110(462), pages C34-49, March. [Downloadable!] (restricted)
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  3. Alan J. Auerbach & James R. Hines Jr., 2001. "Taxation and Economic Efficiency," NBER Working Papers 8181, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Rebecca M. Blank, David Card and Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," Economics Working Papers E99-264, University of California at Berkeley. [Downloadable!]
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  5. Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," NBER Working Papers 7363, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August. [Downloadable!] (restricted)
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  7. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November. [Downloadable!] (restricted)
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  8. Schoeni, R-F, 1996. "Does Aid to Families with Dependent Children Displace Familial Assistance?," Papers 96-12, RAND - Labor and Population Program.
  9. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March. [Downloadable!] (restricted)
  10. Eliana Garces & Duncan Thomas & Janet Currie, 2000. "Longer Term Effects of Head Start," Working Papers 00-20, RAND Corporation Publications Department. [Downloadable!]
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  11. Alesina, Alberto F & Di Tella, Rafael & MacCulloch, Robert, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," CEPR Discussion Papers 2877, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Gary Burtless, 1986. "The work response to a guaranteed income: a survey of experimental evidence," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 22-59. [Downloadable!]
  13. V. Joseph Hotz & Guido W. Imbens & Jacob A. Klerman, 2000. "The Long-Term Gains from GAIN: A Re-Analysis of the Impacts of the California GAIN Program," NBER Working Papers 8007, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February. [Downloadable!] (restricted)
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  15. Cox, Donald & Jakubson, George, 1995. "The connection between public transfers and private interfamily transfers," Journal of Public Economics, Elsevier, vol. 57(1), pages 129-167, May. [Downloadable!] (restricted)
  16. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May. [Downloadable!] (restricted)
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  17. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-77, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrew Clark & Fabrice Etilé, 2003. "Don't Give up on me Baby: Spousal Correlation in Smoking Behaviour," DELTA Working Papers 2003-25, DELTA (Ecole normale supérieure). [Downloadable!]
    Other versions:
  2. Rita Asplund, 2004. "A Macroeconomic Perspective on Education and Inequality," Discussion Papers 906, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Jordan D. Matsudaira & Rebecca M. Blank, 2008. "The Impact of Earnings Disregards on the Behavior of Low Income Families," NBER Working Papers 14038, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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