Paternalism and the alleviation of poverty
Typically the tools available for redistribution are price subsidies and direct cash transfers. Conventional economic theory indicates that the efficiency loss is minimized if cash transfers are used instead of price subsidies. But in almost all economies, including advanced economies, price subsidies are implemented and cash transfers are seldom used. The author argues that taxpayers enjoy the poorer citizen's specific consumption package more than improving the poorer citizen's general economic welfare. Her objective is to identify the conditions under which price subsidies represent a more efficient way of alleviating poverty than cash payments, given taxpayers'paternalistic preferences. She concludes that when the taxpayers'prevalent behavior is paternalism, and taxpayers have more weight in society, the option for redistribution would be to target price subsidies to the poor. This brings about a greater improvement in overall social welfare and happier taxpayers than any other policy. With this solution, the poor are somewhat better off, even though they would rather receive cash transfers, which would represent the same financial cost to the economy.
|Date of creation:||31 Jan 1992|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
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.:
- Robert Holzmann, 1990. "The Welfare Effects of Public Expenditure Programs Reconsidered," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 338-359, June.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
- S. Q. Lemche, 1986. "Remarks on Non-paternalism and the Second Theorem of Welfare Economics," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 270-80, May.
- G. C. Archibald & David Donaldson, 1976. "Non-Paternalism and the Basic Theorems of Welfare Economics," Canadian Journal of Economics, Canadian Economics Association, vol. 9(3), pages 492-507, August.
- Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994.
"Optimal non-linear income taxation for the alleviation of income-poverty,"
European Economic Review,
Elsevier, vol. 38(8), pages 1613-1632, October.
- Ravi Kanbur & Michael Keen & Matti Tuomala, 1990. "Optimal Non-Linear Income Taxation for the Alleviation of Income Poverty," Working Papers 799, Queen's University, Department of Economics.
- Kanbur, Ravi & Keen, Michael & Toumala, Matti, 1991. "Optimal non-linear income taxation for the alleviation of income poverty," Policy Research Working Paper Series 616, The World Bank.
- Kanbur, R. & Keen, M. & Tuomala, M., 1990. "Optimal Non-Linear Income Taxation for the Alleviation of Income Poverty," The Warwick Economics Research Paper Series (TWERPS) 368, University of Warwick, Department of Economics.
- Burtless, Gary, 1990. "The Economist's Lament: Public Assistance in America," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 57-78, Winter.
- Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
- Besley, Timothy J & Kanbur, S M Ravi, 1988. "Food Subsidies and Poverty Alleviation," Economic Journal, Royal Economic Society, vol. 98(392), pages 701-19, September.
- Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-57, Part I Se.
- Peter A. Diamond & James A. Mirrlees, 1973. "Aggregate Production with Consumption Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 87(1), pages 1-24.
- Rader, Trout, 1980. "The second theorem of welfare economics when utilities are interdependent," Journal of Economic Theory, Elsevier, vol. 23(3), pages 420-424, December.
- Lawrence D. Schall, 1972. "Interdependent Utilities and Pareto Optimality," The Quarterly Journal of Economics, Oxford University Press, vol. 86(1), pages 19-24.
- Dorfman, Robert, 1975. "Note on a Common Mistake in Welfare Economics," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 863-64, August.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:822. 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.