Welfare targeting in networks

Nizar Allouch and Maia King

Journal of Mathematical Economics, 2021, vol. 96, issue C

Abstract: This paper investigates welfare targeting for public goods in networks. First, we show that a tax/subsidy scheme (not necessarily budget-balanced) affects each consumer only insofar as it affects his neighbourhood. Second, we show that either a Pareto-improving income redistribution can be found or there exist Negishi weights, which we relate to the network structure. Third, in the case of Cobb–Douglas preferences, we show that a Law of Welfare Targeting holds and links two well-known notions of the comparative statics of policy interventions: neutrality and welfare paradoxical effects. Collectively, our findings uncover the importance of the −1 eigenvalue to economic and social policy: it is an indication of how consumers absorb the impact of income redistribution.

Keywords: Public goods; Tax/subsidy; Welfare; Network; −1 eigenvalue (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Working Paper: Welfare targeting in networks (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:96:y:2021:i:c:s0304406821000586

DOI: 10.1016/j.jmateco.2021.102508

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