ABSTRACT
This chapter provides both a theoretical and an applied discussion of the bearing of imperfections upon the allocation and equity of state benefits. It offers evidence on the efficiency and efficacy of the British Income Support (formerly, Supplementary Benefits) programme in providing benefits net of claiming costs and in influencing the level of ‘social welfare’. We can also illustrate that extent to which the state appears to misallocate Income Support to the non-poor and to withhold it from the truly poor, as well as the extent to which these allocative errors are mitigated or aggravated by the deterrence effect of claiming inconveniences. Furthermore, we look at the desirability of some marginal and major changes in government redistributive policies, discussing a few of the considerations involved in an optimal redistributive design. Finally, we develop both a general and an empirical analysis of the impact of allocative imperfections upon the level of progressivity, vertical equity, horizontal inequity and redistribution exerted by redistributive tools.
