Optimal management of transfers: An odd paradox

François Bourguignon and Jean-Philippe Platteau
Additional contact information
Jean-Philippe Platteau: UNamur - Université de Namur [Namur]

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: This paper considers the case of transfers when there exists a serious preference misalignment between the transfer-maker and the beneficiary. The former wants to reduce the resulting outcome discrepancy through monitoring the use of the transfer and imposing sanctions if the discrepancy proves too large. This external discipline combines with the 'internal discipline' of the beneficiary, that is his/her willingness and ability to align with the transfer-maker's objective. Besides the fact that costs of monitoring and sanctioning are explicitly taken into account, an original feature of our model specification is that the two types of discipline are made comparable: they can be summed up to obtain an aggregate discipline. We show that, paradoxically, an (exogenous) improvement of internal discipline may be over-compensated by a fall of external discipline. Total discipline thus decreases and the discrepancy between the actual and the intended uses of the transfer increases instead of decreasing. Another consequence is that the relationship between internal and total disciplines may be non-monotonic. These results generalize to alternative specifications of the basic model.

Keywords: Transfer; Preference misalignment; Incentives Aid (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Published in Journal of Public Economics, 2018, 162, pp.143-157. ⟨10.1016/j.jpubeco.2018.01.001⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Optimal management of transfers: An odd paradox (2018)
Working Paper: Optimal management of transfers: An odd paradox (2018)
Working Paper: Optimal Management of Transfers: an Odd Paradox (2017)
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:hal:pseptp:hal-01784348

DOI: 10.1016/j.jpubeco.2018.01.001

Access Statistics for this paper

More papers in PSE-Ecole d'économie de Paris (Postprint) from HAL
Bibliographic data for series maintained by Caroline Bauer ().