Should Subsidized Private Transfers Replace Government Social Insurance?

August 1, 2000

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Format: Chicago

Connel Fullenkamp, and Ralph Chami. Should Subsidized Private Transfers Replace Government Social Insurance?, (USA: International Monetary Fund, 2000) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Private transfers between individuals or through organized charities are increasingly viewed as an alternative for government social insurance programs. This paper models the incentive effects of government subsidized private transfers and finds that while there is a significant welfare benefit to subsidizing private transfers, there is also a significant welfare cost to this policy. It is shown analytically, as well as through simulations, that the optimal subsidy to private transfers is positive for a wide range of parameter values. This result indicates that subsidized private transfers in net terms are welfare enhancing.

Subject: Expenditure, Financial sector policy and analysis, Income, Labor, Labor markets, Moral hazard, National accounts, Social assistance spending, Tax allowances, Taxes

Keywords: Altruism, Asymmetric information, Charity, Consumption externality, Equilibrium price, Income, Income risk, Labor market, Labor market externality, Labor market outcome, Labor market response, Labor markets, Marginal utility, Moral hazard, Non-governmental organizations (NGOs), Nonmarket transfers, Social assistance spending, Social insurance, Tax allowances, Utility function, Welfare cost, Welfare effect, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/150
Stock No:

WPIEA1502000
ISBN:

9781451856958
ISSN:

1018-5941

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