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

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 taxfunded 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