Majority voting in a model of means testing

We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establis...

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Bibliographic Details
Published in:European economic review 2020-02, Vol.122, p.103351, Article 103351
Main Authors: Cardak, Buly A., Glomm, Gerhard, Ravikumar, B.
Format: Article
Language:English
Subjects:
Means testing
Political support
Sequential majority voting
Targeting
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Summary:We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority-voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households’ preferences, but depends only on income heterogeneity.
ISSN:0014-2921
1873-572X
DOI:10.1016/j.euroecorev.2019.103351