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Means‐tested versus Universal Transfers: Alternative Models and Value Judgements
Author(s) -
Creedy John
Publication year - 1998
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00091
Subject(s) - economics , inequity aversion , econometrics , poverty , constant elasticity of substitution , inequality , value (mathematics) , elasticity of substitution , microeconomics , mathematical economics , public economics , mathematics , statistics , production (economics) , mathematical analysis , economic growth
This paper illustrates the use of different criteria used to evaluate alternative tax and transfer systems. Means‐tested and universal transfer systems are compared, using numerical examples involving a small number of individuals, in order to highlight the precise effects on incomes. The implications of fixed incomes and of endogenous incomes, using constant elasticity of substitution utility functions, are examined. Comparisons between tax systems involve fundamental value judgements concerning inequality and poverty, and no tax structure can be regarded as unambiguously superior to another. Judgements depend on the degree of inequality aversion and attitudes to poverty. However, in cases where means‐testing is preferred, the desired tax or taper rate applying to benefits is substantially less than 100 per cent.