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Majority Voting in a Model of Means Testing

We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines linearly with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority voting equilibrium, when the households vote first on the size of the program and then on the means-testing rate. We show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size.

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https://doi.org/10.20955/wp.2018.014


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