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A political economy of loose means-testing in targeted social programs

Author

Listed:
  • Cremer, Helmuth
  • Klimaviciute, Justina
  • Pestieau, Pierre

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

This paper studies the political sustainability of programs that are targeted toward the poor. Given that the poor to whom these programs cater do not constitute a majority, we show that for their own good it pays to let the middle class benefit from them in a random way. This approach mimics the actual institutional arrangements whereby middle-class individuals feel that they can successfully apply to the programs. We consider a two stage decision process: first a Rawlsian government chooses the probability at which the middle class is allowed to benefit from a given program; then, majority voting determines the level of benefit and the rate of contribution. At the first, constitutional stage, the government cannot commit to a specific level of taxes and benefit but anticipates that these are set by majority voting in the second stage.

Suggested Citation

  • Cremer, Helmuth & Klimaviciute, Justina & Pestieau, Pierre, 2021. "A political economy of loose means-testing in targeted social programs," LIDAM Reprints CORE 3162, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3162
    DOI: https://doi.org/10.1016/j.econlet.2021.109810
    Note: In: Economics Letters, 2021, vol. 202, 109810
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    Cited by:

    1. Justina Klimaviciute & Pierre Pestieau, 2023. "The economics of long‐term care. An overview," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1192-1213, September.

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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