The Political Economy of Targeting
One of the most widely used methods of targeting is to reduce welfare benefits as income rises. Although the need for such targeting is clear enough, it also entails two important difficulties. Firstly, the prospect for the recipients of losing part of their benefits if they were to earn more can be a deterrent to work harder. Secondly, by reducing the number of recipients, targeting reduces the political support for taxation and redistribution. The purpose of this paper is to study the voting equilibrium of the degree of targeting and the level of taxation in an economy where labor supply is variable. The analysis reveals that targeting may be fatal for redistribution even though it rejects strictly less than the richest half of the population, and that it is not possible for a coalition of the extremes to form and reject the middle income group from the welfare system. Moreover, because targeting affects labor supply, the authors find that Pareto improvements are possible when targeting is either 'too low' or 'too high.' They also find that voting simultaneously over taxation and targeting is favorable to the poor in the sense that they can converge to their most-preferred policy by successively forming a majority coalition with the rich to increase targeting and with the middle to increase taxation. Copyright 1998 by Kluwer Academic Publishers
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 95 (1998)
Issue (Month): 1-2 (April)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/public+finance/journal/11127/PS2|
References listed on IDEAS
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.:
- Slemrod, Joel & Yitzhaki, Shlomo & Mayshar, Joram & Lundholm, Michael, 1994.
"The optimal two-bracket linear income tax,"
Journal of Public Economics,
Elsevier, vol. 53(2), pages 269-290, February.
- Joel Slemrod & Shlomo Yitzhaki & Joram Mayshar, 1991. "The Optimal Two-Bracket Linear Income Tax," NBER Working Papers 3847, National Bureau of Economic Research, Inc.
- Moffitt, Robert, 1985. "A problem with the negative income tax," Economics Letters, Elsevier, vol. 17(3), pages 261-265.
- Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
- Webb, Steven, 1995. "Social Security Policy in a Changing Labour Market," Oxford Review of Economic Policy, Oxford University Press, vol. 11(3), pages 11-26, Autumn.
- Kramer, Gerald H., 1977. "A dynamical model of political equilibrium," Journal of Economic Theory, Elsevier, vol. 16(2), pages 310-334, December.
- Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
- Philippe De Donder, 2000. "Majority voting solution concepts and redistributive taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 17(4), pages 601-627.
- Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
- Guesnerie Roger & Seade Jesus, 1981. "Nonlinear pricing in a finite economy," CEPREMAP Working Papers (Couverture Orange) 8118, CEPREMAP.
- De Donder, Philippe & Le Breton, Michel & Truchon, Michel, 1996. "A Set-Theoretical Comparison of C2 Social Choice Correspondences," Cahiers de recherche 9624, Université Laval - Département d'économique.
- De Donder, P & Le Breton, M & Truchon, M, 1996. "A Set-Theoretical Comparison of C2 Social Choice Correspondences," Papers 9624, Laval - Recherche en Energie.
- De Donder, P. & Le Breton, M. & Truchon, M., 1996. "A Set-Theoretical Comparison of C2 Social Choice Correspondences," Papers 180, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- Hindriks, J., 1994. "The Targeting of Social Security : A Tax Reform Approach," Papers 148, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- Hindriks, J., 1999. "The Targeting of Social Security: a Tax Reform Approach," Discussion Papers 9918, Exeter University, Department of Economics.
- Alberto Alesina & Philippe Weil, 1992. "Menus of Linear Income Tax Schedules," NBER Working Papers 3968, National Bureau of Economic Research, Inc.
- Roger B. Myerson, 1994. "Analysis of Democratic Institutions: Structure," Discussion Papers 1095, Northwestern University, Center for Mathematical Studies in Economics and Management Science. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:95:y:1998:i:1-2:p:177-200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.