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Repeated Interaction and the Public Provision of Private Goods

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  • Claudio Thum
  • Marcel Thum

Abstract

The literature suggests that governments can use in‐kind transfers to design efficient and targeted redistribution schemes if individual incomes are not directly observable. We investigate the extent to which the self‐selection property of in‐kind transfers carries through if redistributive transfers are made repeatedly. In a two‐period setting, the government may gain information about the individuals' incomes in the first period and exploit this information for making targeted transfers in the second‐period. This, however, also triggers changes in the individuals' behavior. If the government can commit to its future policy, the least cost policy may involve randomization between cash and in‐kind transfers. Without commitment, the dynamic setting works against the government's interest. It may no longer be able to use in‐kind transfers to generate information about the individuals' types. JEL classification: H42; H2

Suggested Citation

  • Claudio Thum & Marcel Thum, 2001. "Repeated Interaction and the Public Provision of Private Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 625-643, December.
    • Handle: RePEc:bla:scandj:v:103:y:2001:i:4:p:625-643
    DOI: 10.1111/1467-9442.00263
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    Cited by:

    1. Thum, Marcel, 2004. "Korruption," Dresden Discussion Paper Series in Economics 11/04, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    2. Zohal Hessami & Claudio Thum & Silke Uebelmesser, 2012. "A Political Economy Explanation for In-kind Redistribution: The Interplay of Corruption and Democracy," Working Paper Series of the Department of Economics, University of Konstanz 2012-25, Department of Economics, University of Konstanz.
    3. Zohal Hessami & Silke Uebelmesser, 2016. "A political-economy perspective on social expenditures: corruption and in-kind versus cash transfers," Economics of Governance, Springer, vol. 17(1), pages 71-100, February.
    4. Iregui, Ana Maria, 2005. "Decentralised provision of quasi-private goods: The case of Colombia," Economic Modelling, Elsevier, vol. 22(4), pages 683-706, July.
    5. Margarita Katsimi & Thomas Moutos, 2004. "Monopoly, Inequality and Redistribution via the Public Provision of Private Goods," CESifo Working Paper Series 1318, CESifo.

    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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