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Title:A theory of child targeting PDF Logo
Authors:Bargain, Olivier
Donni, Olivier
Issue Date:2007
Series/Report no.:Working paper series // UCD Centre for Economic Research 2007/03
Abstract:There is a large empirical literature on policy measures targeted at children but surprisingly very little theoretical foundation to ground the debate on the optimality of the different instruments. In the present paper, we examine the merit of targeting children through two general policies, namely selective commodity taxation and cash transfer to family with children. We consider a household that comprises an adult and a child. The household behavior is described by the maximization of the adult's utility function, which depends on the child's welfare, subject to a budget constraint. The relative effects of a price subsidy and of a cash benefit on child welfare are then derived. In particular, it is shown that 'favorable' distortions from the price subsidies may allow to redistribute toward the child. The framework is extended to account for possible paternalistic preferences of the State. Finally, it is shown that, in contrast to the traditional view, well-chosen subsidies can be more cost effective than cash transfers in alleviating child poverty.
Subjects:commodity taxation
child benefit
targeting
intrahousehold distribution
social welfare
paternalism
labeling
JEL:D13
D31
D63
H21
H31
Document Type:Working Paper
Appears in Collections:Working Paper Series, UCD School of Economics, University College Dublin (UCD)

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