Redistribution at the hospital
This paper studies redistribution by means of a public supply of medical treatment. We show that the government can redistribute income towards low-ability individuals in a world of asymmetric information by offering bundles of medical treatment and redistributive payment. If self-selection is a problem, then the separating scheme offers high-ability individuals complete treatment against a high payment, and low-ability individuals partial treatment against a low payment. In particular, the level of treatment offered low-ability individuals is distorted downwards.
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