Rationing increase welfare: theory and an application to India's ration shop system
By: Gadenne, Lucie
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Material type: 
BookPublisher: American Economic Journal: Economic Policy Description: 12(4), Nov, 2020: p.144-177.Subject(s): Income distribution
In:
American Economic Journal: Economic PolicySummary: In many developing countries, households can purchase limited quantities of goods at a fixed subsidized price through ration shops. This paper asks whether the characteristics of developing countries explain why governments use such systems. I find an equity-efficiency trade-off: an efficiency-maximizing government will never use ration shops, but a welfare-maximizing one might to redistribute and provide insurance. Welfare gains of ration shops will be highest for necessity goods and goods with high price risk. I calibrate the model for India and find that ration shops are welfare improving for three of the four goods sold through the system today. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 12(4), Nov, 2020: p.144-177 | Available | AR124325 |
In many developing countries, households can purchase limited quantities of goods at a fixed subsidized price through ration shops. This paper asks whether the characteristics of developing countries explain why governments use such systems. I find an equity-efficiency trade-off: an efficiency-maximizing government will never use ration shops, but a welfare-maximizing one might to redistribute and provide insurance. Welfare gains of ration shops will be highest for necessity goods and goods with high price risk. I calibrate the model for India and find that ration shops are welfare improving for three of the four goods sold through the system today. – Reproduced
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