A Theory of Child Targeting

32 Pages Posted: 1 Apr 2007

See all articles by Olivier Bargain

Olivier Bargain

IZA Institute of Labor Economics; University College Dublin (UCD)

Olivier Donni

University of Cergy-Pontoise - THEMA; IZA Institute of Labor Economics; Centre Interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Date Written: March 2007

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.

Keywords: commodity taxation, child benefit, targeting, intrahousehold distribution, social welfare, paternalism, labeling

JEL Classification: D13, D31, D63, H21, H31

Suggested Citation

Bargain, Olivier and Donni, Olivier, A Theory of Child Targeting (March 2007). IZA Discussion Paper No. 2669, Available at SSRN: https://ssrn.com/abstract=977519

Olivier Bargain

IZA Institute of Labor Economics ( email )

P.O. Box 7240
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Germany

University College Dublin (UCD) ( email )

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Ireland
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HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm

Olivier Donni (Contact Author)

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre Interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE) ( email )

Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada

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