TY  - JOUR
AU  - Blank,Rebecca M.
TI  - Can Equity and Efficiency Complement Each Other?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8820
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8820
L1  - http://www.nber.org/papers/w8820.pdf
N1  - Author contact info:
Rebecca M. Blank
Under Secretary for Economic Affairs
Department of Commerce
Economics and Statistics Administration
Herbert C. Hoover Building, Room 4848
1401 Constitution Avenue, NW
Washington, DC  20230
Tel: 202-482-3727
Fax: 202-482-0432
E-Mail: rblank@doc.gov
AB  - Economists tend to assume that redistributive transfers increase equity but cause a loss in efficiency, the so-called 'leaky bucket' effect.  This paper explores situations where efficiency losses are small or where equity and efficiency might even complement each other.  A simple model identifies key parameters that cause leaky buckets and which policy can affect.  Three situations are discussed where the equity/efficiency tradeoff may be low:  When transfers go to populations with no capacity to change their behavior; when transfers go to programs that limit efficiency losses through behavioral requirements; and when commodities are subsidized that function as long-term investments and create future income gains.
ER  -