Post Midterm

Question 1

Iron Triangle

Answer 1

1. reduce program costs
2. encourage work
3. redistribute income

Question 2

tagging

Answer 2

condition eligibility on characteristics correlated with ability

Question 3

screening

Answer 3

design program to be attractive to low ability people and unattractive to high ability people

Question 4

qualities of the ideal tag

Answer 4

1. highly correlated with ability
2. immutable

Question 5

Akerlof takeaway

(1978)

Answer 5

tagging allows greater support for the poor with less distortion in tax structure

Question 6

benefits of tagging

Answer 6

higher transfers to low-ability people at lower deadweight loss from taxation

Question 7

costs of tagging

Answer 7

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

Question 8

Social Security Disability Insurance, SSDI or DI

Answer 8

true insurance

pay into the system when working, get benefits if become disables

Question 9

Supplemental Security Income (SSI)

Answer 9

cash welfare program conditioned on disability

Question 10

Research methods from most to least preferable

Answer 10

1. OLS
2. IV
3. diff-in-diff
4. trend break

Question 11

Local average treatment effect

Answer 11

the effect of treatment for the complier population

Question 12

screening offers a tradeoff between…

Answer 12

productive efficiency and targeting efficiency

Question 13

types of perverse program design

Answer 13

restrictions on earned income

in-kind transfers vs. cash

ordeals

Question 14

paradox of screening

Answer 14

by imposing cost on low-ability types, we can make them better off

Question 15

earning restrictions theory

Answer 15

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

Question 16

in-kind transfers amount

Answer 16

set amount of consumption good X to above B’s optimum

Question 17

in-kind transfers caveat

Answer 17

low-ability people need to demand more of good X than high ability people

Question 18

ordeals theory

Answer 18

high type person A will have a higher opportunity cost of receiving benefit than low type person B

Question 19

cost/benefits of screening

Answer 19

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)

Question 20

in-kind transfers theory

Answer 20

make the quality of good X a little worse until the good significant enough loss on undeserving person’s utility

Question 21

Parallel trends assumption

Answer 21

in the absence of the treatment effect, the treatment and control groups would follow the same trends after treatment time T

Question 22

pre-post DD estimating equation

Answer 22

Outcome_i= α + n Treatment + γ After + β (Treatment * After ) + λ (Covariates_i) + ϵ_i

Question 23

effects of an increase in disability insurance

Answer 23

1. the distortionary effect of benefit increase on labor force decisions
2. welfare gain experienced by disability recipients

Question 24

why the cost (or benefit) of giving 50 million people health insurance might be larger than 1 person *50 mill

Answer 24

spillover effects into the rest of the general population

selection

Question 25

the cost of giving one person health insurance 50 million times > cost of giving 50 mil insurance

Answer 25

depends on whether infrastructure is already in place

Question 26

ex-post moral hazard

Answer 26

once I am already sick, do I consume more health care because the price is lower? (does not have to do with risky behavior)