Recommended reading
More for the poor is less for the poor: the politics of targeting
Negotiating the balance between universal welfare and targeted programmes
Authors:
L.H. Pritchett; J.B. Gelbach
Publisher:
World Bank, 1997
This World Bank study assesses the welfare properties of targeted income support transfers when a basic political feasibility condition is imposed on the levels of targeting and taxation. Both economists and political scientists have long recognised the possibility that targeting could undermine political support for redistribution and hence reduce the available budget. This paper develops a simple economy model in which both non-targeted (universally received) and targeted transfers are available. The policymaker chooses the share of the budget to be spent on each type of transfer while the budget is determined through majority voting.
The authors find that, if the policymaker ignores political feasibility and assumes that the budget is fixed, he or she will choose full targeting of transfers - in the process maximizing social welfare and the utility of the poor. By contrast, when the budget is determined by majority voting, the study found that the equilibrium tax rate falls sharply enough that transfers to poor and unemployed agents are actually decreasing in the degree of targeting. [adapted from author]
