More for the poor is less for the poor : the politics of targeting
Standard economic analyses suggests that when the budget for redistribution is fixed, transfers should be targeted to (that is, means-tested for) those most in need. But both economists and political scientists have long recognized the possibility that targeting could undermine political support for redistribution, and hence reduce the available budget. The authors formalize this recognition, developing a simple economy in which both nontargeted (universally received) and targeted transfers are available. The policymaker chooses the share of the budget to be spent on each type of transfer while the budget is determined through majority voting. Their results are striking. If the policymaker ignores political feasibility and assumes that the budget is fixed, she will choose full targeting of transfers -in the process minimizing social welfare and the utility of the poor. By contrast, when the policymaker recognizes budgetary endogeneity, she will choose zero targeting, spending theentire budget on the universally received transfer. Social welfare, the budget for redistribution, and the utility of poor agents are all maximized in the resulting equilibrium.
|Date of creation:||31 Jul 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-77, May.
- Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1799. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.