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Welfare Policy: Cash Versus Kind, Self‐Selection and Notches

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  • Nirvikar Singh
  • Ravi Thomas

Abstract

This paper investigates second‐best allocations where the government lacks full information about consumer types, and how such allocations may be implemented through notch schemes. Thus, we provide another rationale for notches in addition to that investigated by Blinder and Rosen (1985). We use a model of Blackorby and Donaldson (1988), extending their results to more general preferences and to more general tax‐subsidy instruments (piecewise linear, rather than linear). We argue that observed policies are sometimes of this nature: In‐kind subsidies that are available only if consumption equals or exceeds a particular amount have been used in practice, in housing, and medical care.

Suggested Citation

  • Nirvikar Singh & Ravi Thomas, 2000. "Welfare Policy: Cash Versus Kind, Self‐Selection and Notches," Southern Economic Journal, John Wiley & Sons, vol. 66(4), pages 976-990, April.
    • Handle: RePEc:wly:soecon:v:66:y:2000:i:4:p:976-990
    DOI: 10.1002/j.2325-8012.2000.tb00306.x
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    References listed on IDEAS

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    3. Barr, Nicholas, 1992. "Economic theory and the welfare state : a survey and interpretation," LSE Research Online Documents on Economics 279, London School of Economics and Political Science, LSE Library.
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    6. Jerry A. Hausman & David A. Wise, 1980. "Discontinuous Budget Constraints and Estimation: The Demand for Housing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 75-96.
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