A political economy of loose means-testing in targeted social programs

Helmuth Cremer, Justina Klimaviciute and Pierre Pestieau

No 3162, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper studies the political sustainability of programs that are targeted toward the poor. Given that the poor to whom these programs cater do not constitute a majority, we show that for their own good it pays to let the middle class benefit from them in a random way. This approach mimics the actual institutional arrangements whereby middle-class individuals feel that they can successfully apply to the programs. We consider a two stage decision process: first a Rawlsian government chooses the probability at which the middle class is allowed to benefit from a given program; then, majority voting determines the level of benefit and the rate of contribution. At the first, constitutional stage, the government cannot commit to a specific level of taxes and benefit but anticipates that these are set by majority voting in the second stage.

Keywords: Targeted transfers; Political support; Redistribution paradox (search for similar items in EconPapers)
JEL-codes: D72 H23 H50 (search for similar items in EconPapers)
Date: 2021-05-01
Note: In: Economics Letters, 2021, vol. 202, 109810
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A political economy of loose means-testing in targeted social programs (2021)
Working Paper: A political economy of loose means-testing in targeted social programs (2021)
Working Paper: A political economy of loose means-testing in targeted social programs (2021)
Working Paper: A political economy of loose means-testing in targeted social programs (2020)
Working Paper: A political economy of loose means-testing in targeted social programs (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvrp:3162

DOI: 10.1016/j.econlet.2021.109810

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