IDEAS home Printed from https://ideas.repec.org/p/cfe/wpcefa/2013_08.html
   My bibliography  Save this paper

Combating fraud in Poverty-Alleviation Programs - should we use monitoring, workfare or both?

Author

Listed:
  • Márcia Ferreira de Oliveira

    (CEFAGE-UE and Instituto Politécnico de Portalegre, Portugal)

  • Cesaltina Pacheco Pires

    (CEFAGE-UE, Departamento de Gestão, Universidade de Évora, Portugal)

  • Paulo Côrte-Real

    (Nova School of Business and Economics, INOVA, Universidade Nova de Lisboa)

Abstract

This paper presents a static model of adverse selection where the government (principal) aims to minimize the cost of a Poverty Alleviation Program (PAP) ensuring that all agents have access to a minimum level of income. In a two-type-agent model (Rich and Poor) in which agents differ either on their income generating ability or in their disutility of labour, we study the effectiveness of workfare and monitoring as tools to prevent fraud in PAP. When only income generating ability is unknown, we show that the optimal PAP depends on the fraction of Rich agents, the costs of monitoring and the productivity gap between the two types. Thus, the optimal solution might use (a) only workfare; (b) only monitoring; (c) a combination of both; or (d) none of the instruments. When agents differ only in disutility of labour, the optimal PAP does not include workfare. It is shown that the greater the fraction of Rich Type agents and the higher the income differential, the more likely is that the optimal solution includes monitoring.

Suggested Citation

  • Márcia Ferreira de Oliveira & Cesaltina Pacheco Pires & Paulo Côrte-Real, 2013. "Combating fraud in Poverty-Alleviation Programs - should we use monitoring, workfare or both?," CEFAGE-UE Working Papers 2013_08, University of Evora, CEFAGE-UE (Portugal).
    • Handle: RePEc:cfe:wpcefa:2013_08
    as

    Download full text from publisher

    File URL: http://www.cefage.uevora.pt/en/content/download/3675/47352/version/1/file/2013_08.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-261, March.
    2. Katherine Cuff, 2000. "Optimality of workfare with heterogeneous preferences," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 149-174, February.
    3. Claus Thustrup Hansen & Torben Tranæs, 1999. "Optimal Workfare in Unemployment Insurance," Discussion Papers 99-06, University of Copenhagen. Department of Economics.
    4. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    5. Timothy Besley & Stephen Coate, 1995. "The Design of Income Maintenance Programmes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 187-221.
    6. Nuno Garoupa, 1997. "The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-295, September.
    7. Garoupa, Nuno, 1997. "The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-295, September.
    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. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, July.
    2. Antonio Acconcia & Marcello D'Amato & Riccardo Martina, 2003. "Corruption and Tax Evasion with Competitive Bribes," CSEF Working Papers 112, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Ulrich Blum & Nicole Steinat & Michael Veltins, 2008. "On the rationale of leniency programs: a game-theoretical analysis," European Journal of Law and Economics, Springer, vol. 25(3), pages 209-229, June.
    4. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2007. "Optimal Unemployment Insurance with Monitoring and Sanctions," Economic Journal, Royal Economic Society, vol. 117(518), pages 399-421, March.
    5. Bowles, Roger & Faure, Michael & Garoupa, Nuno, 2000. "Economic analysis of the removal of illegal gains," International Review of Law and Economics, Elsevier, vol. 20(4), pages 537-549, December.
    6. Henrik Jordahl & Luca Micheletto, 2005. "Optimal Utilitarian Taxation and Horizontal Equity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 681-708, October.
    7. Garoupa, Nuno & Klerman, Daniel, 2004. "Corruption and the optimal use of nonmonetary sanctions," International Review of Law and Economics, Elsevier, vol. 24(2), pages 219-225, June.
    8. Robert Moffitt, 2006. "Welfare work Requirements with Paternalistic Government Preferences," Economic Journal, Royal Economic Society, vol. 116(515), pages 441-458, November.
    9. Poret, Sylvaine, 2009. "An optimal anti-drug law enforcement policy," International Review of Law and Economics, Elsevier, vol. 29(3), pages 221-228, September.
    10. Pradiptyo, Rimawan, 2012. "Does Corruption Pay in Indonesia? If So, Who are Benefited the Most?," MPRA Paper 41384, University Library of Munich, Germany.
    11. Lisa R. Anderson & Gregory DeAngelo & Winand Emons & Beth Freeborn & Hannes Lang, 2017. "Penalty Structures And Deterrence In A Two-Stage Model: Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1833-1867, October.
    12. Éric Langlais & Marie Obidzinski, 2015. "The Structure of Fines in the Light of Political Competition," Revue d'économie politique, Dalloz, vol. 125(5), pages 717-729.
    13. Dahm, Matthias & González, Paula & Porteiro, Nicolás, 2018. "The enforcement of mandatory disclosure rules," Journal of Public Economics, Elsevier, vol. 167(C), pages 21-32.
    14. Obidzinski, Marie & Oytana, Yves, 2019. "Identity errors and the standard of proof," International Review of Law and Economics, Elsevier, vol. 57(C), pages 73-80.
    15. Neil Rickman & Robert Witt, 2007. "The Determinants of Employee Crime in the UK," Economica, London School of Economics and Political Science, vol. 74(293), pages 161-175, February.
    16. Craig Brett & Laurence Jacquet, 2015. "Workforce or workfare? The optimal use of work requirements when labour is supplied along the extensive margin," Canadian Journal of Economics, Canadian Economics Association, vol. 48(5), pages 1855-1882, December.
    17. Hugh Gravelle & Nuno Garoupa, 2002. "Optimal Deterrence with Legal Defense Expenditure," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 366-379, July.
    18. Eric Langlais, 2009. "On the Ambiguous Effects of Repression," Annals of Economics and Statistics, GENES, issue 93-94, pages 327-348.
    19. Éric Langlais, 2010. "Les criminels aiment-ils le risque ?," Revue économique, Presses de Sciences-Po, vol. 61(2), pages 263-280.
    20. Lando, Henrik, 2000. "The Optimal Standard of Proof in Criminal Law When Both Fairness and Deterrence Matter," Working Papers 2000-7, Copenhagen Business School, Department of Finance.

    More about this item

    Keywords

    Poverty alleviation programs; workfare; monitoring; fraud; adverse selection.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cfe:wpcefa:2013_08. 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: Angela Pacheco (email available below). General contact details of provider: https://edirc.repec.org/data/cfevopt.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.