The optimal subsidy to private transfers under moral hazard

Journal Article (Journal Article)

Private income transfers are increasingly viewed as an alternative to government income transfers such as social insurance and foreign aid. This paper models the incentive effects of government-subsidized private transfers and finds that although there is a significant welfare benefit to subsidizing private transfers, there is also a significant welfare cost. It is shown analytically, as well as through simulations, that the optimal subsidy to private transfers falls when the market reaction is taken into consideration.

Duke Authors

Cited Authors

  • Chami, R; Fullenkamp, C

Published Date

  • December 1, 2002

Published In

Volume / Issue

  • 49 / 2

Start / End Page

  • 242 - 251

International Standard Serial Number (ISSN)

  • 1020-7635

Citation Source

  • Scopus