Cremer, Helmuth, Klimaviciute, Justina and Pestieau, Pierre (2021) A political economy of loose means-testing in targeted social programs. Economics Letters, 202 (109810). pp. 1-12.

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Identification Number : 10.1016/j.econlet.2021.109810

Abstract

This paper studies the political sustainability of programs that are targeted towards the poor. Given that the poor to whom these programs cater do not constitute a majority, we show that for their own good it pays to let the middle class benefit from them in a random way. This approach mimics the actual institutional arrangements whereby middle-class individuals feel that they can successfully apply to the programs. We consider a two stage decision process: first a Rawlsian government chooses the probability at which the middle class is allowed to benefit from a given program; then, majority voting determines the level of benefit and the rate of contribution. At the first, constitutional stage, the government cannot commit to a specific level of taxes and benefit but anticipates that these are set by majority voting in the second stage.

Item Type: Article
Language: English
Date: May 2021
Refereed: Yes
Place of Publication: Amsterdam
Uncontrolled Keywords: Targeted transfers, Political support, Redistribution paradox
JEL Classification: D72 - Economic Models of Political Processes - Rent-Seeking, Elections, Legislatures, and Voting Behavior
H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H50 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 22 Mar 2021 10:41
Last Modified: 01 May 2022 01:00
OAI Identifier: oai:tse-fr.eu:125428
URI: https://publications.ut-capitole.fr/id/eprint/43032

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