Cremer, Helmuth
Klimaviciute, Justina
Pestieau, Pierre
[UCL, ULg]
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.
Bibliographic reference |
Cremer, Helmuth ; Klimaviciute, Justina ; Pestieau, Pierre. A political economy of loose means-testing in targeted social programs. In: Economics Letters, Vol. 202, p. 109810 (2021) |
Permanent URL |
http://hdl.handle.net/2078.1/248378 |