Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 36, No. 4, pp.357-388
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2023
Received 23 Oct 2023 Accepted 03 Nov 2023
DOI: https://doi.org/10.22904/sje.2023.36.4.001

Differential time and money pricing as a mechanism for in-kind redistribution

Jeremy Clark ; Bonggeun Kim
Department of Economics and Finance, University of Canterbury, Christchurch, New Zealand jeremy.clark@canterbury.ac.nz
Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, South Korea bgkim07@snu.ac.kr

JEL Classification: D30, D45, H31, I18

Abstract

We propose that differential pricing can be used to implement the distributional goal of “specific egalitarianism”, or that allocation of a good be independent of income, but increasing in relative strength of preference or need. Governments could provide the good at multiple “outlets” offering different money and time prices. Individuals would self-select based on time opportunity cost. We show that differential pricing achieves specific egalitarianism more efficiently than tax-funded uniform public provision as the 1) relative importance of the good rises, 2) elasticity of substitution between goods falls, 3) variation in preferences increases and 4) proportion of the poor falls or income inequality rises.

Keywords:

In-kind provision, Specific egalitarianism, Differential pricing

Acknowledgments

For helpful comments we wish to thank Michael Hoy, and participants at the CPEG session of the Canadian Economics Association Meeting in Calgary, as well as seminar participants in the Economics Departments at the University of Guelph and New South Wales. Conference travel funding from the Business School of the University of Canterbury is gratefully acknowledged.

References

  • Alexeev, M. and Leitzel, J., “Income distribution and price controls: targeting a social safety net during economic transition.” European Economic Review 45 (No.9 2001): 1647-1663. [https://doi.org/10.1016/S0014-2921(00)00089-1]
  • Barzel, Y., “A Theory of Rationing by Waiting.” Journal of Law and Economics 17(No.1 1974): 73-95. [https://doi.org/10.1086/466785]
  • Blackorby, C., and Donaldson, D., “Cash versus kind, self-selection, and efficient transfers.” American Economic Review 78(No. 4 1988): 691-700.
  • Blomquist, S., and Christiansen, V., “Public provision of private goods as a redistributive device in an optimum income tax model.” Scandinavian Journal of Economics 97(No.4 1995): 547-567. [https://doi.org/10.2307/3440542]
  • Boadway, R., and Marchand, M., “The use of public expenditures for redistributive purposes.” Oxford Economic Papers 47(No. 1 1995): 45-59. [https://doi.org/10.1093/oxfordjournals.oep.a042161]
  • Buckley, N., Cuff, K., Hurley, J., McLeod, L., Nuscheler, R., and D. Cameron., Willingness-to-pay for parallel private health insurance: evidence from a laboratory experiment, Working Paper, York University, November 19th 2010.
  • Bucovetsky, S., “On the use of distributional waits.” Canadian Journal of Economics 17 (No. 4 1984): 699-717. [https://doi.org/10.2307/135067]
  • Clark, J., and Kim, B., “Paying vs. waiting in the pursuit of specific egalitarianism.” Oxford Economic Papers 59(No. 3 2007): 486-512. [https://doi.org/10.1093/oep/gpm004]
  • Cuff, K., Hurley, J., Mestelman, S., Muller, A., and R. Nuscheler., “Public and private health-care financing with alternative public rationing rules.” Heath Economics 21, (No. 2 2010): 83-100. [https://doi.org/10.1002/hec.1698]
  • Donaldson, D., and Eaton, B. C., “Patience, more than its own reward: a note on price discrimination.” Canadian Journal of Economics 14(No. 1 1981): 93-105. [https://doi.org/10.2307/134842]
  • Holt, C., and Sherman, R., “Waiting-line auctions.” Journal of Political Economy 90(No. 2 1982): 280-294. [https://doi.org/10.1086/261056]
  • Liu, L., and McDonald, J., “Economic efficiency of second-best congestion pricing schemes in urban highway systems.” Transportation Research Part B: Methodological 33(No. 3 1999): 157-188. [https://doi.org/10.1016/S0191-2615(98)00025-3]
  • Lulfesmann, C., and Myers, G., “Two-tier public provision: Comparing public systems.” Journal of Public Economics 95(No. 11-12 2011): 1263-1271. [https://doi.org/10.1016/j.jpubeco.2010.08.002]
  • Nichols, D., Smolensky, E., and Tideman, N., “Discrimination by waiting time in merit goods.” American Economic Review 61(No. 3 1971): 312-323.
  • O’Shaughnessy, T., The taxing issue of queues, Discussion Paper 18, Oxford University Department of Economics, July 2000.
  • Park, J., Ellis, G., Kim, S., and Prideaux, B., “An investigation of perceptions of social equity and price acceptability judgments for campers in a U.S. national forest.” Tourism Management 31(No. 2 2010): 202-212. [https://doi.org/10.1016/j.tourman.2009.02.012]
  • Polterovich, V. “Rationing, queues, and black markets.” Econometrica 61(No. 1 1993): 1-28. [https://doi.org/10.2307/2951776]
  • Rogers, P., de Silva, R. and R. Bhatia. “Water is an economic good: How to use prices to promote equity, efficiency, and sustainability.” Water Policy 4(No. 1 2002): 1-17. [https://doi.org/10.1016/S1366-7017(02)00004-1]
  • Romanow Commision. Building on Values: the Future of Health Care in Canada, Final Report of the Commission on the Future of Health Care in Canada, Government of Canada, November 26th 2002.
  • Rosen, H., Public Finance. Sixth Edition, New York: McGraw Hill Irwin. 2002a.
  • Rosen, S., “Markets and diversity.” American Economic Review 92 (No. 1 2002b): 1-15. [https://doi.org/10.1257/000282802760015577]
  • Rothschild, M., and Stiglitz, J., “Equilibrium in competitive insurance markets.” Quarterly Journal of Economics 90(No. 4 1976): 629-649. [https://doi.org/10.2307/1885326]
  • Sah, R., “Queues, rations, and markets: comparisons of outcomes for the poor and the rich.” American Economic Review 77(No. 1 1987): 69-77.
  • Small, K., and Yan, J., “The value of “value pricing” of roads: Second-best pricing and product differentiation.” Journal of Urban Economics 49(No. 2 2001): 310-336. [https://doi.org/10.1006/juec.2000.2195]
  • Suen, W., “Rationing and rent dissipation in the presence of heterogeneous individuals.” Journal of Political Economy 97(No.6 1989): 1384-1394. [https://doi.org/10.1086/261659]
  • Tirole, J., The Theory of Industrial Organization. MIT Press, Cambridge. 1988.
  • Tobin, J., “On limiting the domain of inequality.” Journal of Law and Economics 13(No. 2 1970): 263-277. [https://doi.org/10.1086/466693]
  • Weitzman, M., “Is the price system or rationing more effective in getting a commodity to those who need it most?” The Bell Journal of Economics 8(No. 2 1977): 517-524. [https://doi.org/10.2307/3003300]
  • Weitzman, M., “Price distortion and shortage deformation, or what happened to the soap?” American Economic Review 81(No. 3 1991): 401-414.