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A Dynamic Incentive-Based Argument for Conditional Transfers

Author

Listed:
  • Dilip Mookherjee

    (Institute for Economic Development, Boston University)

  • Debraj Ray

    (Department of Economics, New York University)

Abstract

We compare the long-run e ects of replacing unconditional transfers to the poor by transfers conditional on the education of children. Unlike the Mirrlees income taxation model, the distribution of skill evolves endogenously. Human capital accumulation follows the Freeman-Ljungqvist-Mookherjee-Ray OLG model with missing capital markets and dynastic bequest motives. Conditional transfers (funded by taxes on earnings of the skilled) are shown to induce higher long run output per capita and (both utilitarian and Rawlsian) welfare, owing to their superior effect on skill accumulation incentives. The result is established both with two skill levels, and a continuum of occupations.

Suggested Citation

  • Dilip Mookherjee & Debraj Ray, 2008. "A Dynamic Incentive-Based Argument for Conditional Transfers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-170, Boston University - Department of Economics.
    • Handle: RePEc:bos:iedwpr:dp-170
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    Cited by:

    1. Joshi, Shareen & Sivaram, Anusuya, 2014. "Does it Pay to Deliver? An Evaluation of India’s Safe Motherhood Program," World Development, Elsevier, vol. 64(C), pages 434-447.
    2. Caroline Flammer, 2011. "The Role Of Family Ties For The Optimal Design Of Human Capital Contracts," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 4(2), pages 1-22.
    3. Mookherjee, Dilip & Napel, Stefan, 2021. "Welfare rationales for conditionality of cash transfers," Journal of Development Economics, Elsevier, vol. 151(C).
    4. Schneider, Andrea, 2010. "Redistributive taxation vs. education subsidies: Fostering equality and social mobility in an intergenerational model," Economics of Education Review, Elsevier, vol. 29(4), pages 597-605, August.
    5. Dilip Mookherjee & Silvia Prina & Debraj Ray, 2010. "A Theory Of Endogenous Fertility With Occupational Choice," Boston University - Department of Economics - Working Papers Series WP2010-036, Boston University - Department of Economics.
    6. Napel, Stefan, 2014. "A Pareto Efficiency Rationale for the Welfare State," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100496, Verein für Socialpolitik / German Economic Association.

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