Working Paper: NBER ID: w7092
Authors: David F. Bradford; Daniel N. Shaviro
Abstract: This paper aims to provide a swift tour of the economic issues presented by vouchers and thus to fill an apparent gap in the literature for a basic survey of the subject. Among the issues it considers are: factors determining a voucher's cash-equivalence; reasons (such as paternalism, externalities, and distribution) for giving beneficiaries non-cash-equivalent vouchers rather than cash; optimal tax issues involved in the design of vouchers and the choice between vouchers and other delivery mechanisms, including factors determining the optimal marginal reimbursement rate (MRR) in a voucher program, and the similarity between this question and that of determining optimal marginal tax rates (MTRs) under the income tax; the incentive effects of voucher eligibility criteria, such as income or asset tests; factors determining the allocative and price effects of vouchers, both in the short run when unexpectedly enacted and at equilibrium; and factors relevant to the choice between private and public supply that may often overlap with the decision whether to adopt a voucher program.
Keywords: Vouchers; Economic Policy; Consumer Choice; Healthcare; Education
JEL Codes: I22; H52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| voucher design (L42) | consumer behavior (D19) |
| voucher can be cash-equivalent (H41) | effectiveness of vouchers (I22) |
| non-cash-equivalent vouchers (H41) | inferior to cash (E41) |
| replacing non-cash-equivalent vouchers with cash (H55) | Pareto improvement for recipients with stable preferences (D63) |
| optimal MRR (L21) | consumer behavior (D19) |
| inappropriate MRR structures (D47) | inefficiencies in resource allocation (D61) |
| eligibility criteria for vouchers (I22) | effective marginal tax rates (MTRs) (H31) |
| effective marginal tax rates (MTRs) (H31) | poverty traps (I32) |