Majority Voting in a Model of Means Testing

RePEc Short ID: pra33
ORCID iD: 0000-0001-6991-4677

Cardak, Buly A.; Glomm, Gerhard; Ravikumar, B.

doi:10.20955/wp.2018.014

Working Paper Revision

Majority Voting in a Model of Means Testing

Abstract: We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.

Keywords: Means testing; Political support; Targeting; Sequential majority voting;

JEL Classification: D70; D72; H20;

https://doi.org/10.20955/wp.2018.014

Status: Forthcoming in European Economic Review