Intervention Efficiency, Incentive Symmetry, and Information

Earl L. Grinols and Peri Silva ()
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Earl L. Grinols: Hankamer School of Business, Baylor University

No 334, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: Assume that government maximizes the well being of its citizens subject to technological, political, and informational constraints. How should equilibrium be perturbed so that equilibrium post-perturbation quantities satisfy new exogenously-specified bounds? We prove an intervention principle and an incentive symmetry result that jointly describe the efficient intervention plus generate for it an equivalence class of interventions. If information is imperfect, asymmetric information may render some members of the equivalence class ineffective, but not others. This fact may be exploited in selected policy applications, meaning in cases where it is possible to increase the effectiveness of traditional entitlement programs, reduce their cost, or both.

Keywords: Welfare Analysis; Policy Intervention; Theory of Policy (search for similar items in EconPapers)
JEL-codes: D61 D62 (search for similar items in EconPapers)
Pages: 26
Date: 2012-07-16, Revised 2012-07-16
New Economics Papers: this item is included in nep-cta
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:334

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