THE USE OF PUBLIC-EXPENDITURES FOR REDISTRIBUTIVE PURPOSES

Governments use expenditures extensively as redistributive devices. Examples include the public provision of health, education, welfare, and public pensions. Our purpose is to investigate the normative rationale for such policies. In particular, we study the role of government expenditures as purely redistributive devices given that the government also uses an optimal non-linear income tax. We assume that public provision to an individual cannot be related to individual characteristics or income, so it is uniform across individuals. We derive a set of sufficient conditions for the use of public expenditures and apply it to the examples of education and pensions.