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Redesigning Optimal Mechanisms in Social Assistance

Cosmin Serbanescu, Adrian Vintilescu and Lacramioara Corches
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Cosmin Serbanescu: National Institute of Internal Control, Bucharest, Romania
Adrian Vintilescu: National Institute of Internal Control, Bucharest, Romania

Theoretical and Applied Economics, 2018, vol. XXV, issue Special, 73-90

Abstract: The need to redesign social assistance mechanisms for poverty relief appears as a natural consequence of changing (sometimes frequent) parameters. The substantiation of the changes to the mechanisms must be transparent, appropriate and above all formal. Thus, it is necessary to carry out impact studies especially in the public revenues redistribution system through poverty aids where the needs of change are often determined both by the volatility of the macroeconomic environment and the social context. The study aims to create a simple, formal, quantitative algorithm for assessing the impact of implementing a public social assistance policy that can be quickly analyzed by decision-makers or even by the public. The quantitative model achieved can be used in the public policies design and aggregates the information into a two-part scorecard that pertains to the specificity of the chosen field and, on the other hand, the observance of general principles of optimal contracts under conditions of informational asymmetry. The specificity of the field chosen in the paper (poverty relief) was analyzed using artificial intelligence techniques, namely data mining algorithms, which are an important component of the new industrial revolution that humanity is currently going through. The result of this type of analysis was to determine a coherent prediction model underlying a sensitivity analysis. The second component approached the specificity of the management policy that was analyzed using principles derived from the theory of mechanism design, resulting in the determination of the possibilities for effective enforcement of public policies to combat poverty. The results have been aggregated into a decision tool based on a scorecard that can underpin the formal and rapid foundation of a public policy decision. The study is useful to specialists in designing optimal redistribution mechanisms for public revenue in social care and can be easily extended to other areas.

Keywords: government policy; provision and effects of welfare programs; measurement and analysis of poverty; asymmetric and private information; mechanism design; forecasting and prediction methods; simulation methods; criteria for decision-making under risk and uncertainty. (search for similar items in EconPapers)
Date: 2018
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