Combating fraud in Poverty-Alleviation Programs - should we use monitoring, workfare or both?

Resumo/Abstract: This paper presents a static model of adverse selection where the State (principal) aims to minimize the cost of a Poverty Alleviation Program (PAP) ensuring that all agents have access to a minimum level of income. In a two-type-agent model (Rich and Poor) in which agents only di¤er in their income generating ability, we study the e¤ectiveness of workfare and monitoring as tools to prevent fraud in PAP. We show that the optimal PAP depends on the fraction of Rich agents, the costs of monitoring and the productivity gap between the two types. Thus, the optimal solution might use (a) only workfare; (b) only monitoring; (c) a combination of both; or (d) none of the instruments.

Outros seminários / Other seminars: Programa completo / Full programme.