Post Midterm Flashcards
Iron Triangle
- reduce program costs
- encourage work
- redistribute income
tagging
condition eligibility on characteristics correlated with ability
screening
design program to be attractive to low ability people and unattractive to high ability people
qualities of the ideal tag
- highly correlated with ability
- immutable
Akerlof takeaway
(1978)
tagging allows greater support for the poor with less distortion in tax structure
benefits of tagging
higher transfers to low-ability people at lower deadweight loss from taxation
costs of tagging
higher administrative cots
type 1 and type 2 errors- some “deserving” people are left out while some “undeserving” people fit in
endogeneity of tag → new type of moral hazard
Social Security Disability Insurance, SSDI or DI
true insurance
pay into the system when working, get benefits if become disables
Supplemental Security Income (SSI)
cash welfare program conditioned on disability
Research methods from most to least preferable
- OLS
- IV
- diff-in-diff
- trend break
Local average treatment effect
the effect of treatment for the complier population
screening offers a tradeoff between…
productive efficiency and targeting efficiency
types of perverse program design
restrictions on earned income
in-kind transfers vs. cash
ordeals
paradox of screening
by imposing cost on low-ability types, we can make them better off
earning restrictions theory
restrict earnings for program recipients because distortion to work incentives of low-ability types is second-order to gain from keeping high-ability types out
in-kind transfers amount
set amount of consumption good X to above B’s optimum
in-kind transfers caveat
low-ability people need to demand more of good X than high ability people
ordeals theory
high type person A will have a higher opportunity cost of receiving benefit than low type person B
cost/benefits of screening
could screen out high ability people, succeed in making the program better for low ability people overall;
could screen out low ability people (cognitive costs)
in-kind transfers theory
make the quality of good X a little worse until the good significant enough loss on undeserving person’s utility
Parallel trends assumption
in the absence of the treatment effect, the treatment and control groups would follow the same trends after treatment time T
pre-post DD estimating equation
Outcomei= α + n Treatment + γ After + β (Treatment * After ) + λ (Covariatesi) + ϵi
effects of an increase in disability insurance
- the distortionary effect of benefit increase on labor force decisions
- welfare gain experienced by disability recipients
why the cost (or benefit) of giving 50 million people health insurance might be larger than 1 person *50 mill
spillover effects into the rest of the general population
selection
