Nº 22 (April, 2005). Leonardo Gasparini & Santiago Pinto. 

This paper examines the argument for public provision of certain private goods, like education and health, based on equality of opportunity by studying the utility possibility frontier of a society in which there is a concern for the distribution of these goods. A given quality of education or health services can be consumed for free in the public sector, but people can opt-out and purchase their desired quality levels in the private sector. Some of the conclusions are: (i) a pure cash transfer is optimal when the utility redistribution is either “sufficiently” small or large; (ii) if and only if both the equality-of-opportunity concern and the utility redistribution are large enough, can an in-kind program which attracts the whole population be justified; (iii) even when everybody chooses the in-kind program, it may be optimal to perform some additional utility redistribution by increasing the size of such program.

JEL Code: D3, H4, I2

Published in Journal of Public Economics 90 (1-2): 143-169. January, 2006.