Agency and the design of welfare systems

Citation
R. Boadway et al., Agency and the design of welfare systems, J PUBLIC EC, 73(1), 1999, pp. 1-30
Citations number
15
Language
INGLESE
art.tipo
Article
Categorie Soggetti
Economics
Journal title
JOURNAL OF PUBLIC ECONOMICS
ISSN journal
0047-2727 → ACNP
Volume
73
Issue
1
Year of publication
1999
Pages
1 - 30
Database
ISI
SICI code
0047-2727(199907)73:1<1:AATDOW>2.0.ZU;2-8
Abstract
Transfers to the needy are administered by social workers whose job it is t o tag welfare applicants to determine eligibility for disability benefits. The accuracy of tagging depends on the effort of the social workers, which is private information. To prevent shirking and induce optimal effort, cost ly monitoring is required. Using the framework of optimal non-linear taxati on, we characterize the form of the optimal tax-transfer system when the go vernment operates a costly welfare system financed by income taxation. High er-income persons self-select into the income tax system. The needy apply f or welfare. If tagged, they receive a disability benefit; if untagged, they receive general welfare benefits. We characterize circumstances under whic h welfare recipients should or should not be induced to work, the structure of the optimal tax-transfer system, and the optimal payment and monitoring of social workers. (C) 1999 Elsevier Science S.A. All rights reserved.