Public Economics Flashcards
Definition of Public Economics
4 questions of PE
when should the gov intervene in the economy (in general)?
Define externalties
Define imperfect competition
Define asymmetric information
what are the functions of taxation?
types of taxation?
5 desirable characteristics of taxation
define deadweight loss in taxation
3 rules of tax incidence
general equilibrium vs partial equilibrium in taxation: meaning
tax fairness: define
redistribution definition
optimal commodity taxation (Ramsey’s rule) + equity implications
optimal income taxation
define marginal tax rate
define average tax rate
define horizontal and vertical equity of taxation
equation consumer’s tax burden
equation producer’s tax burden
Income definition
Wealth definition
VAT taxes definition
Excise taxes definition
Taxable income definition
3 effects of general equilibrium taxation
define progressive/proportional/regressive tax systems
3 phases of taxation in developing countries
1st phase of taxation in developing countries: goals, policies and results + characteristics of dev. countries that influenced ability to collect taxes
2nd phase of taxation in developing countries (Washington Consensus): goals, policies + flat tax, results
Flat tax in Russia
Taxation in Latin America after 2000 + case of Uruguay: policies and results
define capital
what is capital gains tax?
a tax levied on capital gains or profits from the sale of specific types of assets.
what is the global wealth tax?
what is the tax on corporate income?
Arguments in favour of the Flat Tax
Explain graph Deadweight loss in taxation
Explain graph substitution effect in taxation
Explain graph income effect in taxation
Define social security
Define social insurance
Define self insurance
Private means of smoothing consumption
Why people buy insurance?
Define consumption smoothing
Define health insurance
Why does the government intervene in insurance?
Define asymmetric information in insurance
Define adverse selection in insurance
Define moral hazard in insurance
What is the poverty trap? + s-shaped curve
What is the expected utility model in insurance?
the weighted sum of utilities across different states of the world, where weights are the probabilities of each state occurring.
Define risk aversion
Define risk premium
the amount that risk-averse individuals will pay for insurance above and beyond the actuarially fair price.
pooling equilibrium vs. separating equilibrium in insurance
How to measure the importance of social insurance vs. self insurance for consumption smoothing?
the 4 lessons for optimal social insurance
Remedy for adverse selection?
Remedy for moral hazard?
Define social protection (+ 2 categories of social protection)
Define means tested transfer program + graph (effects on individuals’ labor supply decisions)
3 costs of welfare policy
What is the moral hazard in the context of welfare policy?
define categorical welfare program
what is the Benefit reduction rate?
define welfare state
The welfare state is a way of governing in which the state or an established group of social institutions provides basic economic security for its citizens. By definition, in a welfare state, the government is responsible for the individual and social welfare of its citizens.
define the degree of decommodification
define the 3 regimes of welfare
Cash welfare and in kind programs in USA
Conditional cash transfers in Latin America
Chile solidario
Non-contributory pension programs in Africa
What is Universal Basic Income?
Define individual failure
How can the government intervene in the economy (in general)?
WHAT are the effects of government intervention in the economy?
WHAT are the DIRECT effects of government intervention in the economy?
WHAT are the INDIRECT effects of government intervention in the economy?
What is welfare economics?
What is social efficiency?
total social surplus (Consumer’s surplus + Producer’s surplus). Net benefits that consumers and producers received as a result of their trades of goods and services.
What is social welfare?
How do consumers choose?
Define budget constraint + explain the graph
Define: utility, marginal utility, law of diminishing marginal utility
How changes in income affect consumer’s choices?
How changes in price affect consumer’s choices?
Define demand curve
Define supply curve
Define market equilibrium
Define deadweight loss (in general)
What are the 2 welfare Theorems?
Define Pareto efficiency
Define consumer’s surplus
economic measurement of consumer benefits resulting from market competition. A consumer surplus happens when the price that consumers pay for a product or service is less than the price they’re willing to pay.
Define producer’s surplus
Why should the government intervene in education?
Positive externalities: increased productivity, more civic engagement (improved democracy); less crime; helps social mobility (redistribution)
What if government provides public education (graph)?
Explain positive/negative consumption/production externalities (graphs)
Explain the Coase Theorem
under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.
Remedies to externalities?
What is a Pigouvian tax? Graph
Define public goods
Define non-rivalry and non-excludability
What are the problems with public goods?
Define the free rider problem
Define the tragedy of the commons
2 remedies for problems linked to public goods
Explain Laffer curve
