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Targeting Public Services through Unequal Treatment of Unequals

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Abstract

When private goods are publicly provided, government authorities have to determine the distribution of services on recipients. In this paper, the public service provider is assumed to maximize utility defined over service supply to different target groups, given a budget constraint. The production technology is target group specific and depends on the ability of each target group to produce service outcomes. Three benchmark allocation principles are identified: equality of treatment (ET), equality of outcome (EO) and equality of marginal cost (EMC). These principles can be considered to be consistent with special cases of a public preference model, which allows for compromises between different allocation principles. The condition of technological dominance implies that there is a clear-cut equity-productivity trade-off, whereas violations of this condition may reduce the significance of the trade-off.

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  • Audun Langørgen, 2008. "Targeting Public Services through Unequal Treatment of Unequals," Discussion Papers 558, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:558
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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp558.pdf
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    References listed on IDEAS

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    1. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-277, October.
    2. Aaberge, Rolf & Langorgen, Audun, 2003. "Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, vol. 117(1-2), pages 125-161, October.
    3. Kelman, Steven, 1986. "A Case for In-Kind Transfers," Economics and Philosophy, Cambridge University Press, vol. 2(01), pages 55-73, April.
    4. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-377, May.
    5. van de Walle, Dominique, 1998. "Targeting Revisited," World Bank Research Observer, World Bank Group, vol. 13(2), pages 231-248, August.
    6. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    7. Behrman, Jere R & Craig, Steven G, 1987. "The Distribution of Public Services: An Exploration of Local Governmental Preferences," American Economic Review, American Economic Association, vol. 77(1), pages 37-49, March.
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    More about this item

    Keywords

    treatment targeting; technological dominance; equity-productivity trade-off; publicly provided private goods; in-kind transfers;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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