Optimal allocations to heterogeneous agents with an application to stimulus checks

Vegard M. Nygaard, Bent E. S{\o}rensen and Fan Wang

Papers from arXiv.org

Abstract: A planner allocates discrete transfers of size $D_g$ to $N$ heterogeneous groups labeled $g$ and has CES preferences over the resulting outcomes, $H_g(D_g)$. We derive a closed-form solution for optimally allocating a fixed budget subject to group-specific inequality constraints under the assumption that increments in the $H_g$ functions are non-increasing. We illustrate our method by studying allocations of "support checks" from the U.S. government to households during both the Great Recession and the COVID-19 pandemic. We compare the actual allocations to optimal ones under alternative constraints, assuming the government focused on stimulating aggregate consumption during the 2008--2009 crisis and focused on welfare during the 2020--2021 crisis. The inputs for this analysis are obtained from versions of a life-cycle model with heterogeneous households, which predicts household-type-specific consumption and welfare responses to tax rebates and cash transfers.

Date: 2022-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economic Dynamics and Control 138 (May 1, 2022): 104352

Downloads: (external link)
http://arxiv.org/pdf/2204.03799 Latest version (application/pdf)

Related works:
Journal Article: Optimal allocations to heterogeneous agents with an application to stimulus checks (2022)
Working Paper: Optimal allocations to heterogeneous agents with an application to stimulus checks (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2204.03799

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().