The mix of social and private provision of goods and services

Abstract

In some countries, health (insurance) and education are supplied as social goods – at (near) zero prices and funded from taxation. This paper analyses a case where such provision competes with income supplements as a redistribution device, and where taxes or transferable vouchers influence the take-up of the social goods compared to alternatives available in a private market. Each consumer chooses to consume either social or private goods and a vertical market segmentation results from differential demand for quality.