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Can rationing increase welfare? Theory and an application to India’s Ration Shop System
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Gadenne, Lucie (2020) Can rationing increase welfare? Theory and an application to India’s Ration Shop System. American Economic Journal: Economic Policy, 12 (4). pp. 144-177. doi:10.1257/pol.20180659 ISSN 1945-7731.
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Official URL: http://dx.doi.org/10.1257/pol.20180659
Abstract
In many developing countries, households can purchase limited quantities of goods at a fixed subsidized price through ration shops. This paper asks whether the characteristics of developing countries explain why governments use such systems. I find an equity-efficiency trade-off: an efficiency-maximizing government will never use ration shops, but a welfare-maximizing one might to redistribute and provide insurance. Welfare gains of ration shops will be highest for necessity goods and goods with high price risk. I calibrate the model for India and find that ration shops are welfare improving for three of the four goods sold through the system today.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HF Commerce H Social Sciences > HV Social pathology. Social and public welfare |
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Rationing , Rationing -- India, Subsidies -- India , Food relief -- India, Taxation -- India, Public welfare -- India | ||||||
Journal or Publication Title: | American Economic Journal: Economic Policy | ||||||
Publisher: | American Economic Association | ||||||
ISSN: | 1945-7731 | ||||||
Official Date: | November 2020 | ||||||
Dates: |
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Volume: | 12 | ||||||
Number: | 4 | ||||||
Page Range: | pp. 144-177 | ||||||
DOI: | 10.1257/pol.20180659 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Reuse Statement (publisher, data, author rights): | "Copyright © 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 by the American Economic Association. Permission to make digital or hard copies of part or all of American Economic Association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation, including the name of the author. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted. The author has the right to republish, post on servers, redistribute to lists and use any component of this work in other works. For others to do so requires prior specific permission and/or a fee. Permissions may be requested from the American Economic Association Administrative Office by going to the Contact Us form and choosing "Copyright/Permissions Request"" from the menu. | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 6 November 2019 | ||||||
Date of first compliant Open Access: | 11 November 2019 | ||||||
RIOXX Funder/Project Grant: |
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