Multiple Equilibria in Government Transfer Policy with Heterogeneous Agents

Governments usually play an active role in helping the less fortunate. The results, however, seem to be mixed. Some have been considered quite successful, while others have been less so. The aim of this paper is to provide a unified theoretical framework to analyze these experiences. The diversity observable in the real world is explained in terms of multiplicity of equilibria. Welfare comparisons are made and conditions for the equilibria to be Pareto-rankable are provided. Heterogeneity of the population might be important in determining whether the above minimum effort equilibria are in mixed or in pure strategies