IDEAS home Printed from https://ideas.repec.org/p/bav/wpaper/039_schumacher.html

The tragedy (or virtue?) of in-kind redistribution: How the poor pays for the rich's status concerns

Author

Listed:
  • Jan Schumacher

Abstract

The model describes a two person economy, in which one individual with positive exogenous income is altruist towards an individual with no income. The rich individual cares for her own social status. She evaluates her status by comparing disposable net cash incomes. When deciding on the size and on the structure of redistribution, the rich person decides that at least part of the redistribution is done in–kind, even if a private substitute for the publicly provided good is available. The amount of in–kind transfers that is provided exceeds the unconstrained Marshallian demand of the poor individual for the good in question. Hence, optimal policy restricts the poor in his allocative choices. The overall resource transfer is lower when the richer cares for her status compared to a situation in which she does not.

Suggested Citation

  • Jan Schumacher, 2008. "The tragedy (or virtue?) of in-kind redistribution: How the poor pays for the rich's status concerns," Working Papers 039, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:039_schumacher
    as

    Download full text from publisher

    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/039_The-tragedy-of-in-kind-redistribution-How-the-poor-pays-for-the-richs-status-concerns.pdf
    File Function: First version, 2008
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gahvari, Firouz, 1994. "In-kind transfers, cash grants and labor supply," Journal of Public Economics, Elsevier, vol. 55(3), pages 495-504, November.
    2. Benno Torgler & Sascha L. Schmidt & Bruno S. Frey, 2006. "Relative Income Position And Performance: An Empirical Panel Analysis," IEW - Working Papers 268, Institute for Empirical Research in Economics - University of Zurich.
    3. Lommerud, Kjell Erik, 1989. "Educational Subsidies When Relative Income Matters," Oxford Economic Papers, Oxford University Press, vol. 41(3), pages 640-652, July.
    4. repec:lmu:muenar:20652 is not listed on IDEAS
    5. Sen, Amartya, 1988. "Freedom of choice : Concept and content," European Economic Review, Elsevier, vol. 32(2-3), pages 269-294, March.
    6. Fehr, Ernst & Schmidt, Klaus M., 2006. "The Economics of Fairness, Reciprocity and Altruism - Experimental Evidence and New Theories," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 8, pages 615-691, Elsevier.
    7. Gasparini, Leonardo C. & Pinto, Santiago M., 2006. "Equality of opportunity and optimal cash and in-kind policies," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 143-169, January.
    8. Ng, Yew-Kwang, 1987. "Relative-Income Effects and the Appropriate Level of Public Expenditure," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 293-300, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Corazzini, Luca & Esposito, Lucio & Majorano, Francesca, 2012. "Reign in hell or serve in heaven? A cross-country journey into the relative vs absolute perceptions of wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 715-730.
    2. 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.
    3. Désirée I Christofzik & Sebastian G Kessing, 2024. "On the public provision of positional goods," Oxford Economic Papers, Oxford University Press, vol. 76(3), pages 708-721.
    4. Lehmann, M. Christian & Matarazzo, Hellen, 2019. "Voters’ response to in-kind transfers: Quasi-experimental evidence from prescription drug cost-sharing in Brazil," Economics Letters, Elsevier, vol. 184(C).
    5. Heineck, Guido & Süssmuth, Bernd, 2013. "A different look at Lenin’s legacy: Social capital and risk taking in the Two Germanies," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 789-803.
    6. Marco Faravelli & Randall Walsh, 2011. "Smooth Politicians And Paternalistic Voters: A Theory Of Large Elections," Levine's Working Paper Archive 786969000000000250, David K. Levine.
    7. Manuel Antonio Espinoza & Andrea Manca & Karl Claxton & Mark Sculpher, 2018. "Social value and individual choice: The value of a choice‐based decision‐making process in a collectively funded health system," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 28-40, February.
    8. Kamei, Kenju, 2016. "Information Disclosure and Cooperation in a Finitely-repeated Dilemma: Experimental Evidence," MPRA Paper 75100, University Library of Munich, Germany.
    9. Yamada, Katsunori & Sato, Masayuki, 2013. "Another avenue for anatomy of income comparisons: Evidence from hypothetical choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 35-57.
    10. Howard Kunreuther & Erwann Michel-Kerjan, 2015. "Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 171-194, October.
    11. Anne Corcos & Yorgos Rizopoulos, 2011. "Is prosocial behavior egocentric? The “invisible hand” of emotions," Post-Print halshs-01968213, HAL.
    12. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2005. "How much do we care about absolute versus relative income and consumption?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 405-421, March.
    13. Hoffmann, Magnus & Kolmar, Martin, 2017. "Distributional preferences in probabilistic and share contests," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 120-139.
    14. Suzumura, Kotaro & Xu, Yongsheng, 2001. "Characterizations of Consequentialism and Nonconsequentialism," Journal of Economic Theory, Elsevier, vol. 101(2), pages 423-436, December.
    15. Barbera, S. & Bossert, W. & Pattanaik, P.K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    16. Drakopoulos, Stavros A., 2008. "The Concept Of Comparison Income: An Historical Perspective," MPRA Paper 8713, University Library of Munich, Germany.
    17. Christoph Engel & Paul A. M. Van Lange, 2021. "Social mindfulness is normative when costs are low, but rapidly declines with increases in costs," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(2), pages 290-322, March.
    18. T. Guse & B. Hehenkamp, 2006. "The strategic advantage of interdependent preferences in rent-seeking contests," Public Choice, Springer, vol. 129(3), pages 323-352, December.
    19. van Dalen, Hendrik Peter & Henkens, Kene, 2018. "Do people really want freedom of choice? : Assessing preferences of pension holders," Other publications TiSEM 448e8a93-9ded-401f-9da0-7, Tilburg University, School of Economics and Management.
    20. Lacomba, Juan A. & Lagos, Francisco & Reuben, Ernesto & van Winden, Frans, 2017. "Decisiveness, peace, and inequality in games of conflict," Journal of Economic Psychology, Elsevier, vol. 63(C), pages 216-229.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bav:wpaper:039_schumacher. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anton Barabasch (email available below). General contact details of provider: https://edirc.repec.org/data/vierlde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.