Targeted and Universal Benefits in Kind Under Take-Up Costs

Abstract

The article explores the redistribution properties of government provision of private goods when their consumption involves take-up costs in the form of time losses, which vary with the level of public provision. The condition for optimal public provision depends on whether the government can vary the size of the benefit in kind and taxation according to individual characteristics, or it is constrained to provide a uniform benefit and requires that the price of the private market counterpart of the benefit in kind equals the sum of the unit cost of the publicly provided good plus its marginal take-up cost adjusted for efficiency and equity considerations.