The Economics of Social Protection
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The Economics of Social Protection

Lars Söderström

This book focuses on arrangements for redistributing consumption opportunities over the life cycle and for providing compensation for income losses or large expenditures due to reasons such as illness and unemployment. After extensive coverage of the nature of inequalities in income and wealth in a market economy, and various notions of social justice, the author discusses public and private transfers in cash or in kind related to old age, childhood, illness and the like. Importantly, the book takes into account both equity and efficiency aspects.
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Chapter 8: Benefits in Kind

Lars Söderström


8. Benefits in kind Economists have a long tradition of arguing for cash benefits instead of benefits in kind. Still, benefits in kind constitute a large part of the public budget for social protection. Child care, health care and elderly care are important examples. Benefits in kind include vouchers – that is, rights to purchase a particular good, such as child care – giving the recipient the choice of producer from whom the good should be bought. What economists refer to when advocating cash benefits is benefits in kind like food stamps, subsidized housing, school lunches and other typically private goods. The argument is that the same amount of money would be better used if recipients were given a choice to consume what they like best. For example, a particular family getting £100 worth of food stamps might prefer to use this amount for, say, better housing. Since a cash benefit of the same amount has a higher (or equally large) value to the family, food stamps are seen as a wasteful/inefficient way to support families. This argument may be found in most textbooks on public finance and social policy. The economists’ view is criticized for assuming that the purpose of benefits in kind is to enhance the general well being of the recipients, when the purpose in fact may be to satisfy some aspect of social justice. As we have seen in Chapter 3, equality of opportunity may require, for example,...

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