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We examine how group-specific differences in reservation wage, arising due to asymmetries in social entitlements, impact distribution via the joint determination of class conflict between workers and employers, and 'ethnic' conflict among workers. We model a two-dimensional contest, where two unions, representing different sections of workers, jointly but non-cooperatively invest resources against employers in enforcing an exogenously given rent, while also contesting one another. The rent arises from a 'living' wage, set above reservation wage rates via labour regulations. We show that high reservation wage workers gain, and employers lose, from better social entitlements for low reservation wage workers. The latter however benefit, with employers and against the former, from weak labour regulations. When minority/ immigrant workers are marginalized both in the labour market and in non-wage entitlements, improving job access and expanding 'social support' has contradictory effects on class and ethnic conflicts. 'Trade unionism', i.e. political articulation of shared economic interests alone, appears insufficient to temper ethnic conflicts among workers.

We examine the case for maintaining welfare and income redistribution programs even when their adverse general equilibrium effects reduce total earnings of poor households. Using a Cournot model of intra-household decision-making, we show that even if welfare cutbacks generate large increases in household income, these may still reduce the well-being of children and elderly dependants. Our model also explains the higher marginal propensity to consume food out of food stamps in the US, compared to that out of market income, noted in earlier empirical studies. We find evidence consistent with our argument in data from a US Food Stamp experiment.

The “cashout puzzle” is an anomalous empirical regularity noted in studies of the Food Stamp Program, namely that the marginal propensity to consume food out of food stamps is much higher than that out of cash income for those households which spend some cash on food. See Fraker (1990) for a review. The receipt of food benefits in the form of stamps instead of cash does not constrain these households, hence, according to standard microeconomic theory (first considered for the case of food aid by Southworth (1945)), these households would not change their behavior if food stamp benefits were "cashed out". Consequently, according to the standard theory, marginal propensity to consume food out of cash income should be identical to that out of food stamps. In a paper in this journal, Levedahl (1995) offers an interesting explanation for this puzzle. He conjectures the that marginal propensity to consume food out of stamps is higher than that out of income because the marginal utility of food stamp income is less than that of cash income. In this note, we show that this explanation is questionable. Levedahl's condition, by itself, is neither sufficient nor, indeed, necessary to predict that an unconstrained household will reduce its consumption of food when food stamps are converted to cash income.

We examine the case for donors providing financial incentives to, i.e. subsidizing, NGOs to increase community participation. We show that the introduction of such a ‘participation subsidy’ may reduce beneficiary welfare. Thus, eliminating community participation from the set of conditions for funding an NGO may in fact benefit target communities. We show how our theoretical analysis may be operationalized by applying it to data from the NGO sector in Uganda. Our empirical findings appear to reject the case for providing a participation subsidy in that context.

We develop a model of regulation of service-delivery nongovernmental organizations (NGOs), where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda and find regulation to be beneficial in that context.

Levedahl (1995) claims that marginal 'welfare stigma' causes a dollar of food to provide less utility if bought with food stamps rather than cash, and that this explains why, in the United States, the marginal propensity to consume food out of food stamps is larger than that out of income. This hypothesis has been advanced to explain the so-called 'cash-out puzzle': the empirical observation that the marginal propensity to consume food out of food stamps is much higher than that out of income, even for households who spend some cash income on food. We question the claim that stigma explains the cash-out puzzle. We develop a theoretical model to show that marginal welfare stigma is not sufficient to generate the puzzle, and use it to identify the restrictions imposed by the hypothesis that the puzzle is indeed caused by such stigma. Estimates from Engel curves using parametric and nonparametric methods are shown to be inconsistent with the stigma hypothesis.

We examine the case for donors providing financial incentives to, i.e. subsidizing, NGOs to increase community participation. We show that the introduction of such a ‘participation subsidy’ may reduce beneficiary welfare. Thus, eliminating community participation from the set of conditions for funding an NGO may in fact benefit target communities. We show how our theoretical analysis may be operationalized by applying it to data from the NGO sector in Uganda. Our empirical findings appear to reject the case for providing a participation subsidy in that context.

We develop a model of regulation of service-delivery nongovernmental organizations (NGOs), where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda and find regulation to be beneficial in that context.

We develop a model of regulation of service-delivery nongovernmental organizations (NGOs), where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda and find regulation to be beneficial in that context.

We examine the case for donors providing financial incentives to, i.e. subsidizing, NGOs to increase community participation. We show that the introduction of such a ‘participation subsidy’ may reduce beneficiary welfare. Thus, eliminating community participation from the set of conditions for funding an NGO may in fact benefit target communities. We show how our theoretical analysis may be operationalized by applying it to data from the NGO sector in Uganda. Our empirical findings appear to reject the case for providing a participation subsidy in that context.

We examine the case for donors providing financial incentives to, i.e. subsidizing, NGOs to increase community participation. We show that the introduction of such a ‘participation subsidy’ may reduce beneficiary welfare. Thus, eliminating community participation from the set of conditions for funding an NGO may in fact benefit target communities. We show how our theoretical analysis may be operationalized by applying it to data from the NGO sector in Uganda. Our empirical findings appear to reject the case for providing a participation subsidy in that context.

We develop a model of regulation of service-delivery nongovernmental organizations (NGOs), where future grants are conditional on prior spending of some minimal proportion of current revenue on direct project-related expenses. Such regulation induces some NGOs to increase current project spending but imposes wasteful costs of compliance verification on all NGOs. Under a large class of parametric configurations, we find that regulation increases total discounted project expenditure over a regime of no regulation, when verification costs constitute no more than 15% of initial revenue. We characterize the optimal regulatory policy under these configurations. We apply our analysis to a large sample of NGOs from Uganda and find regulation to be beneficial in that context.