The Normative Analysis of Tagging Revisited: Dealing with Stigmatization

Should income transfers be conditional upon personal characteristics of the potential recipients (so-called tagging), or should they only be tied to reported incomes? A still widespread social norm consists in requiring that individuals (of working age) support themselves and their families. Being a welfare recipient is then socially disapproved because it reveals to others that one is unable to fend for oneself and one´s family. In this context, tagging is always suboptimal under a maximin criterion. With a utilitarian criterion, tagging can only be recommended if the distribution of the intensity of stigmatization relative to earnings has small mean and variance and if the mean and variance of the distribution of abilities among the high-ability people are neither too large nor too small.