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Intervention Efficiency, Incentive Symmetry, and Information

  • Earl L. Grinols

    (Hankamer School of Business, Baylor University)

  • Peri Silva

    (Kansas State University and Centro Studi Luca d’Agliano)

Assume that government maximizes the well being of its citizens subject to technological, political, and informational constraints. How should equilibrium be perturbed so that equilibrium post-perturbation quantities satisfy new exogenously-specified bounds? We prove an intervention principle and an incentive symmetry result that jointly describe the efficient intervention plus generate for it an equivalence class of interventions. If information is imperfect, asymmetric information may render some members of the equivalence class ineffective, but not others. This fact may be exploited in selected policy applications, meaning in cases where it is possible to increase the effectiveness of traditional entitlement programs, reduce their cost, or both.

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File URL: http://www.dagliano.unimi.it//media/WP2012_334.pdf
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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 334.

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Length: 26
Date of creation: 16 Jul 2012
Date of revision: 16 Jul 2012
Handle: RePEc:csl:devewp:334
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  1. Helmuth Cremer & Firouz Gahvari & Norbert Ladoux, 2001. "Second-Best Pollution Taxes and the Structure of Preferences," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 258-280, October.
  2. 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.
  3. Gruber, Jonathan & Simon, Kosali, 2008. "Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?," Journal of Health Economics, Elsevier, vol. 27(2), pages 201-217, March.
  4. Bullock, David S, 1995. "Are Government Transfers Efficient? An Alternative Test of the Efficient Redistribution Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1236-74, December.
  5. David S. Bullock & Philip Garcia, 1999. "Testing the Efficient Redistribution Hypothesis: An Application to Japanese Beef Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 408-423.
  6. Munro, Alistair, 1992. "Self-Selection and Optimal In-Sind Transfers," Economic Journal, Royal Economic Society, vol. 102(414), pages 1184-96, September.
  7. Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
  8. Janet Currie & Firouz Gahvari, 2007. "Transfers in Cash and In Kind: Theory Meets the Data," NBER Working Papers 13557, National Bureau of Economic Research, Inc.
  9. repec:dgr:kubcen:199243 is not listed on IDEAS
  10. Micheletto, Luca, 2008. "Redistribution and optimal mixed taxation in the presence of consumption externalities," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2262-2274, October.
  11. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
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