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The Normative Analysis of ‘Tagging’ Revisited : Dealing with Stigmatization

Author

Listed:
  • Laurence, JACQUET

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Bruno, VAN DER LINDEN

    (FNRS, Belgium and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Should income transfers be conditional upon personal characteristics of the potential recipients (the so-called “tagging”) or should they only be tied to reported incomes ? This question is addressed in a partial equilibrium setting distinguishing two types of jobs and a distribution of worker types. In a system with tagging, there is clear evidence that the assessment of the eligibility of applicants ceates stigmatization. By assumption, the intensity of stigma is exogenously distributed. Then, tagging is always suboptimal under a Rawlsian criterion. With a utilitarian criterion, the analysis shows that tax/transfer systems with and without tagging can solve the first-order optimality conditions. A numerical analysis suggests that tagging can only be recommended if the distribution of the intensity of stigmatization relative to earnings is highly concentrated on low values. However, this is only a necessary condition. Tagging is never optimal if the dispersion of abilities among the ‘high-ability people’ is too large or too narrow.

Suggested Citation

  • Laurence, JACQUET & Bruno, VAN DER LINDEN, 2003. "The Normative Analysis of ‘Tagging’ Revisited : Dealing with Stigmatization," LIDAM Discussion Papers IRES 2003030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2003030
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    References listed on IDEAS

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    1. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
    2. Rebecca M. Blank & Patricia Ruggles, 1996. "When Do Women Use Aid to Families with Dependent Children and Food Stamps? The Dynamics of Eligibility Versus Participation," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 57-89.
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    Cited by:

    1. Laurence Jacquet, 2006. "Optimal Disability Assistance When Fraud And Stigma Matter," Working Paper 1098, Economics Department, Queen's University.
    2. Robin Boadway & Pierre Pestieau, 2006. "Tagging and redistributive taxation," Annals of Economics and Statistics, GENES, issue 83-84, pages 123-147.
    3. Shlomo Yitzhaki, 2007. "Cost-Benefit Analysis of Presumptive Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(3), pages 311-326, September.
    4. Kanbur, Ravi & Tuomala, Matti, 2016. "Groupings and the gains from tagging," Research in Economics, Elsevier, vol. 70(1), pages 53-63.
    5. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2013. "Welfare Stigma Re-examined," Foerder Institute for Economic Research Working Papers 275791, Tel-Aviv University > Foerder Institute for Economic Research.
    6. Robin Boadway, 2012. "Recent Advances in Optimal Income Taxation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 15-39, March.
    7. Laurence Jacquet, 2014. "Tagging and redistributive taxation with imperfect disability monitoring," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(2), pages 403-435, February.
    8. Tayibov, Khayyam, 2024. "Tagging Birthplace for Optimal Tax Policy, Redistribution, and Welfare," Working Papers in Economics and Statistics 9/2024, Linnaeus University, School of Business and Economics, Department of Economics and Statistics.
    9. Henrik Jacobsen Kleven & Wojciech Kopczuk, 2011. "Transfer Program Complexity and the Take-Up of Social Benefits," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 54-90, February.
    10. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2015. "Welfare Stigma Re-Examined," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 874-886, December.
    11. Boadway,Robin & Cuff,Katherine, 2022. "Tax Policy," Cambridge Books, Cambridge University Press, number 9781108949453.
    12. Robin Boadway, 2011. "Viewpoint: Innovations in the theory and practice of redistribution policy," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1138-1183, November.
    13. Janet Holtzblatt, 2007. "Implications of Return-Free Tax Systems for the Structure of the Individual Income Tax," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(3), pages 327-349, September.
    14. Zhiyong An, 2010. "Stigma, Optimal Income Taxation, and the Optimal Welfare Program: A Numerical Simulation Approach," Public Finance Review, , vol. 38(1), pages 102-119, January.
    15. Michel, DE VROEY, 2006. "Getting Rid of Keynes ? A reflection on the history of macroeconomics," Discussion Papers (ECON - Département des Sciences Economiques) 2006051, Université catholique de Louvain, Département des Sciences Economiques.

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    More about this item

    Keywords

    tagging; optimal taxation; welfare programs; stigmatization;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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