American Economic Review: Vol. 97 No. 1 (March 2007)
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Conditional Cash Transfers, Public Provision of Private Goods, and Income Redistribution
Gahvari, Firouz, and Enlinson Mattos. 2007. "Conditional Cash Transfers, Public Provision of Private Goods, and Income Redistribution." American Economic Review, 97(1): 491-502.
This paper examines the role of cash transfers as a screening device when combined with in-kind transfers. It shows that linking in-kind to cash transfers makes first-best redistribution possible despite the government's inability to tell rich and poor individuals apart. Moreover, the maximal attainable welfare for the poor can be pushed beyond its first-best level by distorting downward the quality of the indivisible good the poor receive relative to the cash value of their net transfers. Using in-kind transfers alone, as in Besley and Coate (1991), leads to a third-best solution. (JEL D31, H23, H41)
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