Tranfers to families with children as a principal-agent problem
AbstractThe relationship between government and parents is modelled as a principal-agent problem, with the former in the role of principal and the latter in the role of agents. We make three major points. The first is that, if the well-being of the child depends not only on luck, but also on parental actions that the government cannot readily observe, the latter can influence parental behaviour indirectly, by conditioning transfers on performance. The second point is that, if there are market inputs into the making of a happy or successful child, which the government can observe, but cannot ascribe to any particular parent or child because they are bought anonymously, an income transfer policy can be usefully complemented by an indirect tax policy that systematically distorts prices in favour of these inputs. The third is that, if parents care about their children, insurance and incentive considerations must be tempered by the need to compensate parents who have the misfortune of getting a child with low ability or, more generally, less well equipped to make the most of life. Ways of making these findings operative are discussed in some detail.
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Bibliographic InfoPaper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp02_00.
Length: 16 pages
Date of creation: May 2000
Date of revision:
families; children; principal-agent;
Other versions of this item:
- Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May.
- 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.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
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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- Jullien, Bruno, 1997.
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IDEI Working Papers
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- Alessandro Cigno, 2001. "Comparative Advantage, Observability, and the Optimal Tax Treatment of Families with Children," International Tax and Public Finance, Springer, vol. 8(4), pages 455-470, August.
- Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
- Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, vol. 40(8), pages 1561-1589, November.
- Cigno, Alessandro & Pettini, Anna, 2002. "Taxing family size and subsidizing child-specific commodities?," Journal of Public Economics, Elsevier, vol. 84(1), pages 75-90, April.
- Lewis, Tracy R & Sappington, David E M, 1989. "Inflexible Rules in Incentive Problems," American Economic Review, American Economic Association, vol. 79(1), pages 69-84, March.
- Cigno, Alessandro, 1983. "On Optimal Family Allowances," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 13-22, March.
- Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
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