Book contents
- Frontmatter
- Contents
- List of Figures
- Preface
- 1 Introduction
- Markets
- Externalities
- Public Goods
- Imperfect Competition
- Taxation and Efficiency
- Asymmetric Information and Efficiency
- Asymmetric Information and Income Redistribution
- 23 The Distribution of Income
- 24 The Limits to Income Redistribution
- 25 Redistributing Income through Tagging and Targeting
- 26 The Role of Government in a Market Economy
- A Note on Maximization
- References
- Index
25 - Redistributing Income through Tagging and Targeting
from Asymmetric Information and Income Redistribution
Published online by Cambridge University Press: 06 July 2010
- Frontmatter
- Contents
- List of Figures
- Preface
- 1 Introduction
- Markets
- Externalities
- Public Goods
- Imperfect Competition
- Taxation and Efficiency
- Asymmetric Information and Efficiency
- Asymmetric Information and Income Redistribution
- 23 The Distribution of Income
- 24 The Limits to Income Redistribution
- 25 Redistributing Income through Tagging and Targeting
- 26 The Role of Government in a Market Economy
- A Note on Maximization
- References
- Index
Summary
“Give alms to the deserving. Give alms to the undeserving.” So counsels a Zen proverb. Unfortunately, governments cannot rely on such simple decision rules. There are economic and political constraints on the amount of revenue that a government can raise, so every dollar given to the undeserving is a dollar that cannot be given to the deserving. Separating the deserving from the undeserving is therefore an important consideration for any government.
This chapter discusses two kinds of policies that allow greater transfers to the deserving by separating them from the undeserving. The first is tagging, which was first suggested by Akerlof. Under tagging, the government uses information about nonmanipulable characteristics in its attempts to distinguish between these two groups. The second is targeting, proposed by Nichols and Zeckhauser and Blackorby and Donaldson. Here, the government distinguishes between the two groups by exploiting differences in the structure of their demands for goods and services.
TAGGING
It was assumed, in the last chapter, that those in need of assistance could not be identified by innate characteristics, but that they could be identified by their incomes. Neither of these assumptions is entirely correct. Income does not reveal an individual's need for assistance if, for example, the individual has a disability which does not prevent him from working but which forces him to bear significant expenses not borne by others.
- Type
- Chapter
- Information
- A Course in Public Economics , pp. 380 - 389Publisher: Cambridge University PressPrint publication year: 2003