Optimal universal and categorical benefit provision with classification errors and imperfect enforcement

Sean Slack; David Ulph

doi:10.1111/jpet.12218

Optimal universal and categorical benefit provision with classification errors and imperfect enforcement

Research output: Contribution to journal › Article › peer-review

Abstract

We determine the optimal combination of a universal benefit and categorical benefit when individuals differ in their ability to work and, if able to work, their productivity. The categorical benefit is conditioned ex ante on applicants being unable to work and ex post on recipients not working. The awards test makes Type I/II errors. If the ex post condition is (i) not enforced the optimal categorical benefit is positive only if the awards test has discriminatory power, whilst maximum welfare falls with both error propensities; but if (ii) fully enforced the optimal categorical benefit is positive always and maximum welfare can increase with the Type II error propensity.

Original language	English
Pages (from-to)	289-311
Number of pages	23
Journal	Journal of Public Economic Theory
Volume	19
Issue number	2
Early online date	12 Aug 2016
DOIs	https://doi.org/10.1111/jpet.12218
Publication status	Published - Apr 2017

Keywords

Categorical benefit
Classification errors
Universal benefit
Taxation

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10.1111/jpet.12218

Slack_2016_OptimalUniversal_JPET_AAM
© 2016, Wiley Periodicals, Inc. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at onlinelibrary.wiley.com / https://dx.doi.org/10.1111/jpet.12218
Accepted author manuscript, 450 KB
Slack_2016_OptimalUniversal_JPET_Supp_AAMAccepted author manuscript, 321 KB

Cite this

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Optimal universal and categorical benefit provision with classification errors and imperfect enforcement

Abstract

Keywords

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