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Conditional Cash Transfers, Public Provision of Private Goods, and Income Redistribution

  • Firouz Gahvari
  • Enlinson Mattos

This paper examines the role of cash transfers as a screening device when combined with in-kind transfers. It shows that linking in-kind to cash transfers makes first-best redistribution possible despite the government's inability to tell rich and poor individuals apart. Moreover, the maximal attainable welfare for the poor can be pushed beyond its first-best level by distorting downward the quality of the indivisible good the poor receive relative to the cash value of their net transfers. Using in-kind transfers alone, as in Besley and Coate (1991), leads to a third-best solution. (JEL D31, H23, H41)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.1.491
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File URL: http://www.aeaweb.org/aer/data/mar07/20050013_app.pdf
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 1 (March)
Pages: 491-502

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:1:p:491-502
Note: DOI: 10.1257/aer.97.1.491
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  1. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
  2. Bourguignon, Francois & Ferreira, Francisco H. G. & Leite, Phillippe G., 2002. "Ex-ante evaluation of conditional cash transfer programs: the case of bolsa escola," Policy Research Working Paper Series 2916, The World Bank.
  3. Gahvari, Firouz, 1994. "In-kind transfers, cash grants and labor supply," Journal of Public Economics, Elsevier, vol. 55(3), pages 495-504, November.
  4. Gahvari, Firouz, 1995. "In-Kind versus Cash Transfers in the Presence of Distortionary Taxes," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 45-53, January.
  5. 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.
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