overtransfer

Overtransfer is a term used in economics and public policy to describe a transfer of resources that exceeds the amount intended to be delivered or the level that would be efficient given a program’s objectives. It can apply to cash benefits, subsidies, or in-kind transfers and can occur within welfare programs, intergovernmental allocations, or other forms of targeted assistance.

Causes of overtransfer include imperfect targeting, information gaps, administrative errors, and incentives that encourage higher benefit levels. For example, generous replacement rates, incoherent means-testing, or leakage through misclassification can lead some recipients to receive more support than their actual need or policy design would intend. Overtransfer can raise program costs, distort fiscal priorities, and create unintended incentives for work, savings, or behavior that reduces overall policy effectiveness.

Implications vary by context but often encompass higher fiscal costs for the government, potential equity concerns if overtransfers favor certain groups, and inefficiencies in resource allocation. In some cases, it may also interact with inflationary pressures or crowd-out effects in private markets.

Policy responses focus on reducing overtransfer while maintaining sufficient coverage. Approaches include improving targeting accuracy, tightening eligibility rules, implementing gradual benefit phase-outs, introducing sunset clauses or performance-based reviews, and conducting regular audits and evaluations to adjust designs as needed.

See also: leakage, transfer payments, welfare program design, fiscal policy, targeted subsidies.