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A Theory of Child Targeting

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  • Olivier Bargain

    (School of Economics, Univeristy College Dublin, CHILD & IZA Bonn)

  • Olivier Donni

    (University de Cergy-Pontoise, THEMA, CIRPEE & IZA Bonn)

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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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/GearyWp200710.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 200710.

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Length: 31 pages
Date of creation: 08 Mar 2007
Date of revision:
Handle: RePEc:ucd:wpaper:200710

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

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  1. Christiansen, Vidar, 1983. " Some Important Properties of the Social Marginal Utility of Income," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(3), pages 359-71.
  2. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  3. Haddad, Lawrence & Kanbur, Ravi, 1992. "Intrahousehold inequality and the theory of targeting," European Economic Review, Elsevier, vol. 36(2-3), pages 372-378, April.
  4. Peter Kooreman, 2000. "The Labeling Effect of a Child Benefit System," American Economic Review, American Economic Association, vol. 90(3), pages 571-583, June.
  5. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Transfers to Families with Children as a Principal-Agent Problem," CESifo Working Paper Series 351, CESifo Group Munich.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. Schroyen, Fred, 2005. "An alternative way to model merit good arguments," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 957-966, June.
  13. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
  14. Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
  15. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
  16. Laura Blow & Ian Walker & Yu Zhu, 2007. "Who Benefits from Child Benefit?," Working Papers 200716, Geary Institute, University College Dublin.
  17. Michael Michael Keen, 1991. "Needs and Targeting," Working Papers 822, Queen's University, Department of Economics.
  18. 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.
  19. 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.
  20. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  21. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  22. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  23. repec:fth:prinin:468 is not listed on IDEAS
  24. Gronau, Reuben, 1988. "Consumption Technology and the Intrafamily Distribution of Resources:," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1183-1205, December.
  25. 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.
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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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