Income Assistance and Aggregate Disposable Income

Illoong Kwon
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Illoong Kwon: Seoul National University

Korean Economic Review, 2024, vol. 40, 195-218

Abstract: This paper provides a simple theoretical model to analyze how income assistance affects the aggregate disposable income of recipients when a government cannot observe the recipients’ earning capabilities. If the recipients’ earning capabilities are uniformly distributed, means-tested linear income assistance benefits do not affect their aggregate disposable income, regardless of the size or reduction rates of the distributed benefits. Under a realistic distribution of earning capabilities, their aggregate disposable income can even decrease.

Keywords: Income Assistance; Disposable Income; Moral Hazard; Adverse Selection (search for similar items in EconPapers)
JEL-codes: D82 H20 H24 (search for similar items in EconPapers)
Date: 2024
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