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Efficient Income Redistribution under Asymmetric Information

Author

Listed:
  • Yui Nakamura

    (Faculty of Economics, Fukuoka University)

Abstract

This paper discusses the possibility that the presence of asymmetric information may provide more efficient income redistribution than the presence of symmetric information when the focus is on the screening problem although asymmetric information is known to cause inefficient income redistribution. The screening problem is caused when a government intervenes to alleviate poverty. Asymmetric information between individuals and the government regarding individual productivity makes it difficult for the government to target deserving individuals. A lot of studies explain that in-kind transfers, especially inferior goods, such as social housing in small apartments, or low quality wheat or rice, can succeed in solving the problem, although such goods cannot increase the poor's self-supporting efforts to escape from poverty. In this paper, we also find that not only inferior goods but also superior goods which contribute to the poor's self-supporting efforts to escape from poverty can solve the screening problem.

Suggested Citation

  • Yui Nakamura, 2016. "Efficient Income Redistribution under Asymmetric Information," Economics Bulletin, AccessEcon, vol. 36(1), pages 388-394.
    • Handle: RePEc:ebl:ecbull:eb-15-00680
    as

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    References listed on IDEAS

    as
    1. David Coady & Margaret Grosh & John Hoddinott, 2004. "Targeting of Transfers in Developing Countries : Review of Lessons and Experience," World Bank Publications - Books, The World Bank Group, number 14902.
    2. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-377, May.
    3. Yui Nakamura, 2007. "Policy for Poverty Alleviation and Income Redistribution with Quasi‐Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(6), pages 1031-1040, December.
    4. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    5. Dye, Ronald A. & Antle, Rick, 1986. "Cost-minimizing welfare programs," Journal of Public Economics, Elsevier, vol. 30(2), pages 259-265, July.
    6. Firouz Gahvari & Enlinson Mattos, 2007. "Conditional Cash Transfers, Public Provision of Private Goods, and Income Redistribution," American Economic Review, American Economic Association, vol. 97(1), pages 491-502, March.
    7. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Income redistribution; Asymmetric information; Screening; In-kind transfers;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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