Self-Selection and Optimal In-Kind Transfers
AbstractWith in-kind transfer self-selection schemes, agents choose between a set level of public provision or buy freely from the private market. Housing, education, and healthcare are often of this form. The optimal design of these schemes is analyzed here. It is shown that when a charge can be levied for the transfer, an optimal scheme will nearly always raise welfare, while freely provided transfers are unlikely to improve upon optimal linear taxation alone. Surprisingly, optimal schemes may involve high or medium income agents receiving public expenditure, while those on the lowest incomes opt out. Copyright 1992 by Royal Economic Society.
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Bibliographic InfoPaper provided by University of Stirling, Division of Economics in its series Working Papers Series with number 90/3.
Date of creation: Apr 1990
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