A Theory of Child Targeting

No 200710, Working Papers from Geary Institute, University College Dublin

Abstract: There is a large empirical literature on policy measures targeted at children but surprisingly very little theoretical foundation to ground the debate on the optimality of the different instruments. In the present paper, we examine the merit of targeting children through two general policies, namely selective commodity taxation and cash transfer to family with children. We consider a household that comprises an adult and a child. The household behavior is described by the maximization of the adult’s utility function, which depends on the child’s welfare, subject to a budget constraint. The relative effects of a price subsidy and of a cash benefit on child welfare are then derived. In particular, it is shown that ‘favorable’ distortions from the price subsidies may allow to redistribute toward the child. The framework is extended to account for possible paternalistic preferences of the State. Finally, it is shown that, in contrast to the traditional view, well-chosen subsidies can be more cost effective than cash transfers in alleviating child poverty.

Keywords: commodity taxation; child benefit; targeting; intrahousehold distribution; social welfare; paternalism; labeling (search for similar items in EconPapers)
JEL-codes: D13 D31 D63 H21 H31 (search for similar items in EconPapers)
Date: Written 2007-03-08
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http://geary.ucd.ie/images/Publications/WorkingPapers/GearyWp200710.pdf First version, 2007 (application/pdf)

Related works:
Working Paper: A Theory of Child Targeting (2007)
Working Paper: A Theory of Child Targeting (2007)
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