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Income Distribution and Price Controls: Targeting a Social Safety Net During Economic Transition

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  • Michael Alexeev
  • James Leitzel

Abstract

During the ongoing post-communist economic transitions, the relative well-being of many people is changing rapidly, and governments are not well positioned to accurately measure individual living standards. Under such circumstances, continued price controls over basic consumer goods within the state sector, and the associated queuing, can form a serviceable device for targeting poor people for subsidies. With a fixed-price state sector and free-price parallel markets, rich people might choose to avoid queues and shop in the free markets, while poor people would prefer to pay low nominal prices and queue in the state sector. The targeting of subsidies through queues, therefore, can be accomplished even if the government has no information on individual income or living standards. When the alternative to price controls is a poorly targeted explicit social safety net, the resource cost of queues might be more than compensated for by an improvement in the targeting of subsidies.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 281.

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Length: pages
Date of creation: 01 Mar 1999
Date of revision:
Handle: RePEc:wdi:papers:1999-281

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Keywords: price controls; tax evasion; queue-rationing; economic transition; income distribution;

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Cited by:
  1. Jeremy Clark & Bonggeun Kim, 2006. "Differential Time and Money Pricing as a Mechanism for In-kind Redistribution," Working Papers in Economics, University of Canterbury, Department of Economics and Finance 06/07, University of Canterbury, Department of Economics and Finance.
  2. Jeremy Clark & Bonggeun Kim, 2006. "Paying Vs. Waiting in the Pursuit of Specific Egalitarianism," Working Papers in Economics, University of Canterbury, Department of Economics and Finance 06/08, University of Canterbury, Department of Economics and Finance.

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