Lecture 7 - Social security Flashcards

1
Q

Types of benefits (3)

A

1) Contingent: old age, sickness, disability -> pretty uncontroversial and limited labour market impact
2) insurance-type: unemployment insurance
3) social assistance (welfare): final safety net

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2
Q

Means-tested welfare is…

A

based on an assessment of household ‘means’ (eg. income or wealth), paid only if they fall below a threshold

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3
Q

Universal benefits are…

A

normally contingent on some characteristic, eg. child benefit only to mothers of children under 16 (or 18 in full-time ed), REGARDLESS of income, i.e. not means-tested
-> proposal for a Citizens’ outcome, which wouldn’t be contingent on anything, except being an adult

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4
Q

Benefits policy - economic issues

A

1) Info asymmetries
- > MH and incentive to work: distringuishing b/n poor and shirkers
- > how to gather info for targeting most efficiently
2) Equity/efficiency tradeoff
- > poverty trap : some people may be better off not working
- > efficiency cost of taxes required to finance these policies

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5
Q

What is an income taper?

A

When a means-tested benefit is reduced gradually once a threshold is passed, instead of stopping straightaway.

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6
Q

Universal benefits - pros and cons (5)

A
  • advocated as a way to ensure broad support for them
  • higher public expenditure than means-tested
  • admin costs reduced bc no means-test but increased because more recipients
  • avoids low take-up of some means-tested benefits due to possible stigma and/or hassle of claiming
  • avoids errors and frauds (saves admin costs to detect them)
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7
Q

Design of means-tested benefits

A

No taper means possible poverty trap, reduced by taper but not eliminated.
-> taper rate must be carefully thought through

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8
Q

Marginal tax rate =

A

Taper rate + income tax rate

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9
Q

The participation tax rate is…

A

the total change in taxes and benefits when someone starts work

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10
Q

Negative income tax/Citizens’ income

A

Taxpayers with income below a certain threshold would receive income-related payments at the same rate as the tax applied to additional income above the threshold.

  • > equivalent to a guaranteed minimum citizens’ income, which everyone would receive
  • > both costly, require a high income tax rate to break even
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11
Q

How do in-kind transfers affect recipients’ behaviour? (+ examples)

A

They constrain it.

  • vouchers (eg. food stamps in the US)
  • direct payment (eg. housing benefit)
  • direct provision of g&s (eg. health care, education, etc.)
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12
Q

Reasons for in-kind transfers (3) and issue (1)

A
  • paternalism
  • specific egalitarianism: people would like to see that everyone receives adequate food, housing, etc.
  • info asymmetry and better targeting: they allow targeting of recipients despite limited info (self-selection)
  • it may constrain people, reducing their utility relative to receiving a cash transfer (eg. they want less food than stamps offer)
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