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Targeting Public Services through Unequal Treatment of Unequals

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Abstract

When private goods are publicly provided, government authorities have to determine the distribution of services on recipients. In this paper, the public service provider is assumed to maximize utility defined over service supply to different target groups, given a budget constraint. The production technology is target group specific and depends on the ability of each target group to produce service outcomes. Three benchmark allocation principles are identified: equality of treatment (ET), equality of outcome (EO) and equality of marginal cost (EMC). These principles can be considered to be consistent with special cases of a public preference model, which allows for compromises between different allocation principles. The condition of technological dominance implies that there is a clear-cut equity-productivity trade-off, whereas violations of this condition may reduce the significance of the trade-off.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 558.

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Date of creation: Sep 2008
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Handle: RePEc:ssb:dispap:558

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Keywords: treatment targeting; technological dominance; equity-productivity trade-off; publicly provided private goods; in-kind transfers;

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  1. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
  2. Janet Currie & Firouz Gahvari, 2007. "Transfers in Cash and In Kind: Theory Meets the Data," NBER Working Papers 13557, National Bureau of Economic Research, Inc.
  3. 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.
  4. Behrman, Jere R & Craig, Steven G, 1987. "The Distribution of Public Services: An Exploration of Local Governmental Preferences," American Economic Review, American Economic Association, vol. 77(1), pages 37-49, March.
  5. Kelman, Steven, 1986. "A Case for In-Kind Transfers," Economics and Philosophy, Cambridge University Press, vol. 2(01), pages 55-73, April.
  6. Aaberge, Rolf & Langorgen, Audun, 2003. " Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, vol. 117(1-2), pages 125-61, October.
  7. van de Walle, Dominique, 1998. "Targeting Revisited," World Bank Research Observer, World Bank Group, vol. 13(2), pages 231-48, August.
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