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In-Kind versus Cash Transfers in the Presence of Distortionary Taxes

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  • Gahvari, Firouz

Abstract

In-kind transfers can Pareto-dominate cash transfers as a means of income redistribution if in-kind transfers and leisure are Hicks substitutes and leisure is a normal good. The result holds when redistributive instruments also include a linear income tax. The paper proves that, if the poor receive more in-kind transfers (and the rich less) than what they would choose for themselves, then, compared to cash transfers, there will be a higher labor supply by the poor, a lower labor supply by the rich, and higher levels of aggregate pretax income and tax revenues. Copyright 1995 by Oxford University Press.

Suggested Citation

  • 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.
  • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:1:p:45-53
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    Citations

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    Cited by:

    1. Zhuan Pei, 2017. "Eligibility Recertification and Dynamic Opt-In Incentives in Income-Tested Social Programs: Evidence from Medicaid/CHIP," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 241-276, February.
    2. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
    3. Lopez-Rodriguez, David, 2011. "The scope of political redistribution with proportional income taxation," MPRA Paper 44150, University Library of Munich, Germany, revised 2012.
    4. Sören Blömquist & Vidar Christiansen, 1998. "Price Subsidies Versus Public Provision," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 283-306, July.
    5. Blomquist, Soren & Christiansen, Vidar, 1998. "Topping Up or Opting Out? The Optimal Design of Public Provision Schemes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 399-411, May.
    6. DEL REY CANTELI, Elena, 1998. "The effects of economic integration on the provision of mandatory education as a redistributive policy," CORE Discussion Papers 1998057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Boyle, Melissa A. & Lahey, Joanna N., 2016. "Spousal labor market effects from government health insurance: Evidence from a veterans affairs expansion," Journal of Health Economics, Elsevier, vol. 45(C), pages 63-76.
    8. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(2), pages 203-218, June.
    9. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    10. Balestrino, Alessandro, 1999. " User Charges as Redistributive Devices," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 511-524.
    11. Alessandro Balestrino, 2000. "Mixed Tax Systems and the Public Provision of Private Goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 463-478, August.
    12. Firouz Gahvari & Enlinson Mattos, 2007. "Conditional Cash Transfers, Public Provision of Private Goods, and Income Redistribution," American Economic Review, American Economic Association, vol. 97(1), pages 491-502, March.
    13. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2017. "Child Care Subsidies, Quality, and Optimal Income Taxation," CESifo Working Paper Series 6533, CESifo Group Munich.
    14. Wilde, Parke E. & Ranney, Christine K., 1996. "The Distinct Impact Of Food Stamps On Food Spending," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
    15. Calcott, Paul, 2000. "Health care evaluation, utilitarianism and distortionary taxes," Journal of Health Economics, Elsevier, vol. 19(5), pages 719-730, September.
    16. Balestrino, Alessandro, 1997. "Education policy in a non-altruistic model of intergenerational transfers with endogenous fertility," European Journal of Political Economy, Elsevier, vol. 13(1), pages 157-169, February.

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