This paper studies the political sustainability of programs that are targeted towards the poor. Given that the poor to whom these programs cater do not constitute a majority, we show that for their own good it pays to let the middle class benefit from them in a random way. This approach mimics the actual institutional arrangements whereby middle-class individuals feel that they can successfully apply to the programs. We consider a two stage decision process: first a Rawlsian government chooses the probability at which the middle class is allowed to benefit from a given program; then, majority voting determines the level of benefit and the rate of contribution. At the first, constitutional stage, the government cannot commit to a specific level of taxes and benefit but anticipates that these are set by majority voting in the second stage.
Targeted transfers; Political support; Redistribution paradox;
- H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies
- D72: Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H50: General
Helmuth Cremer, Justina Klimaviciute, and Pierre Pestieau, “A political economy of loose means-testing in targeted social programs”, TSE Working Paper, n. 21-1174, April 2021.
Helmuth Cremer, Justina Klimaviciute, and Pierre Pestieau, “A political economy of loose means-testing in targeted social programs”, Economics Letters, vol. 202, n. 109810, May 2021.