The Economics of Vouchers

67 Pages Posted: 19 May 1999 Last revised: 16 Mar 2010

See all articles by David F. Bradford

David F. Bradford

Princeton University, Woodrow Wilson School; NBER; CESifo (Center for Economic Studies and Ifo Institute)

Daniel Shaviro

New York University School of Law

Date Written: April 1999


This paper aims to provide a swift tour of the economic issues presented by vouchers and thus to fill an apparent gap in the literature for a basic survey of the subject. Among the issues it considers are: factors determining a voucher's cash-equivalence; reasons (such as paternalism, externalities, and distribution) for giving beneficiaries non-cash-equivalent vouchers rather than cash; optimal tax issues involved in the design of vouchers and the choice between vouchers and other delivery mechanisms, including factors determining the optimal marginal reimbursement rate (MRR) in a voucher program, and the similarity between this question and that of determining optimal marginal tax rates (MTRs) under the income tax; the incentive effects of voucher eligibility criteria, such as income or asset tests; factors determining the allocative and price effects of vouchers, both in the short run when unexpectedly enacted and at equilibrium; and factors relevant to the choice between private and public supply that may often overlap with the decision whether to adopt a voucher program.

Suggested Citation

Bradford, David F. and Shaviro, Daniel, The Economics of Vouchers (April 1999). NBER Working Paper No. w7092, Available at SSRN:

David F. Bradford (Contact Author)

Princeton University, Woodrow Wilson School ( email )

Department of Economics
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Daniel Shaviro

New York University School of Law ( email )

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