Targeting and Child Poverty

Abstract

We examine the relative merits of targeting children within the household through price subsidies and cash transfers. To do so, we model the behavior of a household composed of one adult and one child. We then show that 'favorable' distortions from price subsidies may allow redistributing toward the child and then derive the conditions under which this redistributive scheme is more e¢ cient than cash trans- fers. The framework is extended to account for possible paternalistic preferences of the social planner and for households composed of two adults with different pref- erences. Applied to a continuum of households, our approach is extended to the problem of child poverty alleviation. In contrast to the traditional view, we show that well-chosen subsidies may be more cost e¤ective than cash transfers in reducing child poverty.indirect taxation; child benefit; targeting; intra-household distribu- tion; social welfare; paternalism; labeling.