Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Public Econ > Quizlet Spreadsheet - Public Economics > Flashcards

Quizlet Spreadsheet - Public Economics Flashcards

1
Q

What are we achieving in this course

A

Making policy decisions based on people’s welfares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

By what mechanism do we convert decisions into utility?

A

Revealed preference

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Key parts of a utility functions

A

Non-satitation and diminishing marginal utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Marginal Rate of Substitution

A

The rate you are willing to trade one good for another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the optimum

A

MRS = Price Ratio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Uncompensated demand

A

Demand based on both income and substitution effects

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Compensated demand

A

Demand based only on the substitution effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Slutsky Equation

A

Uncompensated demand = Compensated demand - Income elasticity weighted by the income share

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is compensating variation?

A

The amount of money required to get back to the original level of utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is equivalent variation?

A

The amount of money lost that is equivalent to the loss in utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is consumer surplus

A

The area below the demand curve, to the left of the quantity, and above the price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Argument for revealed preference

A

Non-paternalistic, we use their own choices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is MRT?

A

Marginal Rate of Transformation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the Marginal Rate of Transformation

A

Slope of the PPF - cost in terms of good x to get one of good y (production)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is Market equilibrium

A

All our prices mean that demand = supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is economic incidence?

A

How a change in price effects the distribution of welfare

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Second welfare theorem

A

We can get to any point on the contract curve by choosing a starting allocation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is Utilitarian welfare?

A

Profits + total consumer utility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Issues with Coasian Bargaining

A

Costs of Bargaining and Costs of enforcement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Coasian Bargaining - costs of bargaining

A

With pollution, millions of agents are involved. Can be countered by government representation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Coasian Bargaining - Cost of Enforcement

A

Monitoring the causes of externalities is difficult

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is Pigouvian taxation

A

Taxing at the exact level of the marginal externality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is the difficulty with choosing the level of Pigouvian Taxation?

A

Hard to know what the correct level is

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the combination of tax and permits?

A

Cap and Trade

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is an Internality

A

When some element of consumption outcomes is not considered when making a consumption decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

When Marginal Benefit of reduction is high, what should we do?

A

Set Quantities/cap and trade

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When Marginal Benefit of reduction is low, what should we do?

A

Set prices/tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are the two conditions for public goods

A

Non-rivalrous and Non-excludable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is non-rivalry?

A

One person’s consumption does not impact another person’s consumption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is non-excludability

A

It is impossible to stop specific people consuming the product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the Samuelson Rule?

A

At the optimum for a public good, The summation of all Marginal Rate of Substitutions will equal the Marginal Rate of Transformation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What is Lindhal Pricing?

A

Tax imposed on everyone equal to their willingness to pay for public goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Issue with Lindhal Pricing

A

Relies on accurate knowledge about people’s private values, which they have no incentive to share

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What does the Gibbard-Satterthwaite rule say?

A

For any given voting rule, there are only two options, voters can vote strategically, or the vote is dictatorial

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Ways to guarantee consistent preference aggregation (no.1)

A

Pareto Criterion - if all prefer A to B, then A is chosen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Ways to guarantee consistent preference aggregation (no.2)

A

Transitivity - When A>B and B>C, A>C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Ways to guarantee consistent preference aggregation (no.3)

A

Adding a non-preferred option should not affect the final decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What is a Condorcet paradox

A

Cycles where each preference has a strategy with a majority over it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Arrow’s impossibility theorem

A

The only consistent aggregation of preferences is dictatorship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What conditions are required for majority voting to be consistent in aggregation

A

Single peaked, single dimension preference aggregation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Why does the median voter rule not produce societally efficient outcomes

A

Median voters often do not equal “mean” voter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

In the tax and transfer model, who chooses the level of taxation

A

The median voter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

In what way are people heterogeneous in the tax and transfer model?

A

Their time endowment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

If wealth is positively skewed, what tax happens in the tax and transfer model?

A

High tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Does the tax and transfer prediction does reflect the reality

A

No, as inequality falls, taxes generally rise.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

What is the evaluation problem?

A

We cannot see the impact of the treatment on the untreated, and non-treatment on the treated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Empirical question

A

Observed difference = treatment effect plus selection bias

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

How do we get rid of selection bias

A

Identification strategies or RCTs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

How to test the strength of your randomisation

A

Consistency of measurable covariates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Randomisation Bias

A

Those taking part may have different treatment effects than the population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Supply-side changes - empirical biases

A

Those supplying the treatment may differ between trial and population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Attrition Bias

A

Those who are in the treatment group may have different attrition rates than the control (can be solved through ITT IV analysis)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Hawthorne Effects

A

People know they are part of an experiment and act differently

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

Contamination Bias

A

Those who were not treated may get treated anyway

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

Substitution Bias

A

Those who were not treated may seek out alternatives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

Externalities and general equilibrium biases

A

The existence of the treatment group may impact the control group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

What is social insurance?

A

Government intervention to provide insurance against adverse events

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

What is the socially efficient level of insurance?

A

Full/perfect consumption smoothing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Why can’t we fully insure everyone? (non government)

A

Asymmetric information, and therefore adverse selection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Why does the government not have an issue with adverse selection?

A

Can use coercion to force everyone to insure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

What is the main issue with the pensions market?

A

Individual failures to make good savings decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

Benefits for government intervention in the pension market?

A

Avoid individual failures, fix market failures, redistribute and insure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

What are the two types of pension schemes

A

Pay as you go and Fully Funded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
64
Q

How does a PAYG pension work

A

Workers pay a tax that funds the current pensioners, with the understanding that the next generation will fund them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
65
Q

How do fully funded pension schemes work?

A

Workers pay money into an account which accrues interest, and then uses that to pay for their retirement themselves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
66
Q

What defines the better choice of PAYG and Fully Funded?

A

Interest rate vs Growth of the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
67
Q

Evidence for paternalism in the pension market

A

Negative correlation between social security spending and elderly poverty rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
68
Q

Explanation for the drop in expenditure at the point of retirement

A

Increase in home production - wellbeing does not fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
69
Q

What sort of savers alter their behaviour when mandates come in

A

Passive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
70
Q

What is a bunching design?

A

Looking for whether people respond to policy by “bunching” around changes to how a policy applies to you

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
71
Q

Bunching study - german retirement

A

People are more likely to retire at specific ages where policies apply differently to them - suggests response to policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
72
Q

Overall takeaway - german retirement study

A

People are slightly responsive to retirement policy, but very responsive to social messaging

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
73
Q

Reasons for intervention in the healthcare market

A

Risk aversion (insurance), adverse selection, equity concerns, underconsumption of preventative healthcare, externalities of communicable diseases.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
74
Q

How does adverse selection play out in the healthcare insurance industry

A

Those who are higher risk are more likely to insure themselves, increasing the risk for the provider, forcing premiums higher ect.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
75
Q

Why are in-kind health benefits better than cash transfers sometimes?

A

Acts as “screening” - only those who need the healthcare will access it, allows you to target the support better

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
76
Q

What are insurance deductibles?

A

Insurees pay up to a certain level of expense, then everything else is paid by the insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
77
Q

What are insurance copayments

A

Insurees pay a fixed amount for accessing resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
78
Q

What is insurance co-insurance

A

Insuree pays a fixed share of each bill

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
79
Q

Why do we not fully insure for healthcare

A

Moral Hazard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
80
Q

Because healthcare is subsidised, what happens to consumption?

A

Overconsumption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
81
Q

What is US Medicaid

A

State-level healthcare provision for poor single mothers, pregnant women, and children

82
Q

What is US Medicare

A

Federal level medical support for the elderly and disabled

83
Q

Why is healthcare expenditure rising in the developed world?

A

Higher quality of healthcare possible, also longer life expectancies ect.

84
Q

What is the foundation of behavioural economics

A

Consistent decision making that does not align with classical consumer theory

85
Q

What is loss aversion

A

People dislike losing more than they like gaining

86
Q

One example of behavioural devices

A

Self control devices

87
Q

Example of behavioural regulation

A

GDPR - cookies opt out/in

88
Q

What are ordering effects

A

People make different decisions when ordering changes

89
Q

Trend in overall taxation in the last 150 years

A

Overall increase, slight plateauing recent years

90
Q

What is the elasticity of demand

A

Marginal change in demand to price, multiplied by price over demand

91
Q

What is the elasticity of supply

A

Marginal change in supply to price, multiplied by price over supply

92
Q

Tax incidence derivation - step one

A

Set up demand = supply, setup question “what is dp/dt”

93
Q

Tax incidence derivation - step two

A

Differentiate D(q) = S(p) (q = p+t), witht he result D’q x dq = S’p x dp

94
Q

Tax incidence derivation - step three

A

Use dq = dp + dt in the equation, giving D’q x (dp+dt) = D’p x dp

95
Q

Tax incidence derivation - step four

A

Rearrange to get dp/dt = D’q/S’p-D’q

96
Q

What does dp/dt represent?

A

The increase in price for the consumer based on an increase in tax

97
Q

Tax incidence derivation - step five

A

Multiply our fraction through by q/Dq = p/Sp, which gives the whole expression in terms of elasticities

98
Q

Tax incidence derivation - step six

A

Get the result dp/dt = el(D)/el(S)-el(D)

99
Q

Key result of tax incidence

A

The incidence of tax is irrelevant to the material impact of tax

100
Q

Reasons we care about inequality?

A

Fairness, political issues, impact on growth, social institutions and taxes

101
Q

Why can we disregard net foreign assets (NFA)?

A

Negligible as a share of national income

102
Q

What are the elements of capital income?

A

Corporate profits, rent, interest

103
Q

What are the elements of labour income

A

Wages, supplements

104
Q

What is the approximate labour/capital share of national income (1-a to a)?

A

70/30

105
Q

Which is less evenly distributed - capital or labour?

A

Capital, mainly owned by a small portion of society

106
Q

What is the wealth to income ratio (K/Y)?

A

Capital divided by total national income

107
Q

What is the average return to capital (r)?

A

Yk/K

108
Q

Accounting law for income share of capital

A

The income share of capital is equal to the average return on capital, multiplied by the wealth to income ratio - a = r x B

109
Q

Is the rate of return on capital constant?

A

No, housing is lower than the stock market, but higher than government bonds etc.

110
Q

Change in the wealth to income (K/Y) ratio - changes since 1970s

A

Has been rising

111
Q

Change in capital share over time

A

Fell between 1800s to the 1920s, is now rising - was once considered stable

112
Q

How to find capital and labour shares of income - cobb douglass

A

In perfect competition, wages and rents are equal to the marginal returns on the factors. You therefore take derivatives of the original function with respect to labour/capital, and then divide through by the original production function (which represents Y)

113
Q

What is the key result about labour/capital share of income in the Cobb-Douglas case

A

Invariable on costs of labour and capital

114
Q

What are the two theories for the increase in capital share?

A

New technology is causing people to substitute away from labour and towards the capital. Also, rising market power is leading to rising rents without increased capital

115
Q

What has caused the large rise in income for the top 10%?

A

Mainly the growth of the top 1%

116
Q

What is the race between education and technology?

A

As technology improves, the skills required to operate them increases, and therefore education needs to improve

117
Q

Who is “winning” the race between education vs technology?

A

Technology - skills premiums are increasing

118
Q

Other reasons that labour share of income is decreasing

A

International wage arbitrage, decline in US minimum wage in real terms, reduced union membership, changing tax rates

119
Q

What are the five data sources that can be used to measure wealth inequality?

A

Household surveys, annual wealth data, inheritance tax data, income tax data, billionaire rankings

120
Q

What happened to equality post world war 2

A

Massive increase

121
Q

Why do we care about labour supply responses?

A

Economic growth, economic efficiency, government revenue, equity, employment rate

122
Q

What is the intensive margin

A

When you have decided whether to work or not, how much do you do

123
Q

Extensive margin

A

Your decision to work or not

124
Q

What are the utility inputs for the labour supply decision

A

Consumption and hours worked (negative utility)

125
Q

When is labour supply optimised

A

When the marginal rate of substitution equals the relative price

126
Q

What is the effect of an increased tax rate on the number of hours worked?

A

It depends - income effect causes increase in hours worked, substitution effect leads to a decrease

127
Q

What is compensated elasticity?

A

The elasticity without income effect (sub effect only)

128
Q

What is the income elasticity?

A

The income effect elasticity

129
Q

What is the uncompensated elasticity?

A

Combined income and substitution effect elasticity

130
Q

What is the shape of the individual labour supply curve?

A

Backwards bending

131
Q

Traditional convexity model of labour supply - what is the impact of small tax change

A

Small change in labour supply

132
Q

What does convexity mean in graph theory

A

All points within a plane can be connected with a straight line that is all within the plane

133
Q

Issues with empirically estimating labour supply

A

Omitted variable biases, reverse causality

134
Q

Which policy did the EISSA labour supply study analyse?

A

The Tax Reform Act of 1986

135
Q

What were the findings of the EISSA study?

A

Labour supply elasticity estimated at .9, but no statistical significance

136
Q

Issues with the EISSA study?

A

Poor statistical significance, the suboptimal control group for the diff-in-diff

137
Q

What does the budget line look like with the EITC?

A

“Humped” - with phase in and phase out

138
Q

Issue with the EITC study

A

Single women already very high workforce participation

139
Q

What is the informational constraint

A

We would like to provide “means tested” benefits based on earnings capacity, to avoid moral hazard. However, we have to use income as “second best”

140
Q

What is tagging?

A

Observable characteristics that are correlated with earnings capacity that are not behaviourally responsive, used to choose apply benefits

141
Q

What are ordeals

A

A process that you have to go to get a benefit - used for screening processes

142
Q

Research on ordeals

A

Some reduced demand occurs with ordeals but doesn’t seem to target the policy better

143
Q

What is the immigrant population of the UK and the US

A

Both 13-15%

144
Q

What variation do we introduce in the migration model?

A

Idiosyncratic preferences for locations - people have “likes”

145
Q

In the migration model, are wages endogenous or exogenous?

A

Endogenous - taxes and the migration rate will impact the wage

146
Q

How do we study tax impacts on migration?

A

Variation on tax rates causing migration - using people’s tax records

147
Q

Kleven, Landais, and Saez (2011)

A

Study of football players and changes in tax rates

148
Q

Football study, Bosman rule

A

Removal of restrictions on transfers in football, lets people make more “optimised” decisions

149
Q

Issue with the football study

A

Tax rate irrelevancy, correlation could be coincidental

150
Q

What was the unique identification strategy used in the “Beckham Scheme” football taxation study?

A

Synthetic diff-in-diff

151
Q

Issue with the “Beckham Scheme”

A

Introduction of Beckham is significant in itself, as it gives value to the league. Also, general equillibria effects

152
Q

What were the findings of the Danish tax study?

A

High skill, sports, entertainers all reacted strongly to tax changes. Also, foreign workers are more tex elastic than domestic workers

153
Q

Issues with migration benefits study

A

Financial policies may be correlated with non-financial policies - hard to identify which ones are reducing the migration levels

154
Q

Migration - Danish welfare payments study

A

Diff-in-diff comparing EU and Non-EU immigration after a policy that impacted the welfare recieved by non EU migrants

155
Q

Danish Welfare for migrants study - results

A

Non EU migrants did drop significantly due to the reduced welfare policy

156
Q

What is the tax base?

A

The total of all taxable income

157
Q

Definition of the Elasticity of Taxable Income

A

Percentage change in taxable income over a percentage change in taxation

158
Q

Where does taxable income response come from?

A

Labour income (choice of work), Capital income (choosing low-tax assets), Tax avoidance (legal manipulation of income), tax evasion (illegal under-reporting of income)

159
Q

What is the issue with a high ETI?

A

Means that taxation will be less efficient, more deadweight loss

160
Q

What is the top income share?

A

The share of income that is earned by high earners

161
Q

US trend in top 1% income share in terms of marginal tax

A

As the marginal tax rate has fallen, the income share of the top 1% has risen

162
Q

Difference between top 1% and others (ETI)

A

Top 1% can adapt their taxable income to the level of marginal tax rate significantly, whereas others cannot

163
Q

How do we empirically study the impact of the tax rate on the top 1%

A

Diff in diff, using the population (or bottom 99% is better imo), as a control

164
Q

Findings of the ETI diff-in-diff model (US)

A

Top 1% were more responsive than the control, hard to tell magnitude

165
Q

How did the UK ETI study and the US study vary?

A

UK used 95-99% as control, US used total income

166
Q

Weakness of ETI studies

A

Could be non-tax reasons for changes, weakening unions, globalisation, social norms etc. that correlate with the changes in tax studied

167
Q

Function for the change in taxable income for the top percentiles (ETI)

A

Log of taxable income = elasticity of taxable income*log change in tax plus a function of time (fixed effects).

168
Q

Elements of the high-income laffer rate

A

Mechanical change in revenue + Behavioural change in revenue

169
Q

UK high-income laffer rate - estimated tax rate

A

0.5

170
Q

Another type of study for ETI

A

Bunching study at tax kinks

171
Q

What is a fiscal externality?

A

Behavioural adaption to tax leads to lower tax revenue for the government

172
Q

Why is there welfare loss of income tax

A

Behavioural changes lead to a move away from the natural equilibrium, which causes lower welfare

173
Q

What determines the behavioural impact of an income tax change

A

Labour supply elasticity

174
Q

What is the marginal deadweight loss at tax rate 0?

A

0

175
Q

Optimal tax income tax problem - setup

A

Objective welfare structure, by setting tax T(z) where z is earnings, with a budget constraint

176
Q

Simple tax model for optimum income tax rate

A

Constant tax rate, with a guaranteed income

177
Q

What does a Rawlsian (maximin) welfare function imply for the optimum tax

A

Maximise tax income, with maximum level of G

178
Q

In non-Rawlsian cases, where does the optimum level of tax fall - left or right of the laffer curve peak?

A

Left

179
Q

Why do we impose commodity taxes?

A

Satisfy a revenue requirement, progressive redistribution, correction of externalities, correction of internalities

180
Q

Commodity taxation - deadweight loss

A

Behavioural change in consumption of the good

181
Q

Expression for marginal deadweight loss for commodities

A

Tax as a proportion of price x elasticity of demand x quantity of consumption

182
Q

Ramsey optimal tax model - setup

A

One representative consumer, consumers like leisure and commodities x1 to xn, each good can have a tax, governments have a revenue goal, and want to maximise welfare subject to the revenue goal

183
Q

Ramsey optimal tax model - assumptions

A

No income effects or cross-market effects (demand for commodities are only a function of the price of that good),

184
Q

Key result of the Ramsey rule

A

Every commodity will have the same marginal deadweight loss of raising funds - we should tax inelastic goods higher than elastic goods

185
Q

What defines the tax rate on a good in the Ramsey Rule

A

The elasticity of the good (inverse elasticity rule)

186
Q

Issues with the feasibility of the Ramsey model

A

Knowing the elasticities, the complexity of admin, introducing new goods for tax purposes, lobbying and corruption

187
Q

The expression for taxes in the equity concerned Ramsey rule

A

Inverse elasticity x equity weight

188
Q

Ramsey rule - equity/efficiency tradeoff

A

In the equity inverse elasticity rule, goods that we weight higher (goods consumed by poorer people) are often more inelastic, so the equity concerns and the elasticity fight against each other

189
Q

Why do we care about capital taxation

A

Unequal distribution, less meritocratic (and therefore does not provide good motivation), capital accumulation is good for growth, key for efficiency

190
Q

Why is capital becoming more important

A

Wealth to income ratio increasing, capital share also increasing

191
Q

Distribution of household wealth

A

Top 1% has ⅓, 1-10% has ⅓, 11-100% has ⅓, financial wealth more unequal than assets

192
Q

US vs Europe - wealth inequality

A

Pre-1970 - Europe was less equal, Post-1970, US in now less equal

193
Q

Savings and Inheritence model - setup

A

Wealth is a function of return, wealth yesterday, earnings, inheritance, and negative consumption, total wealth is the summation of income - outgoings, adjusted to the return on investment, then can be split into lifecycle and inheritance

194
Q

Comments on inheritance post 1970

A

Has been returning in importance as a percentage of GDP

195
Q

Ways to tax capital

A

Corporate income tax, individual income tax, estate and gift taxes, property taxes

196
Q

Two-period model for capital taxation

A

Two periods with discount for the future, utility based on consumption and leisure. We can save with interest

197
Q

What is the marginal rate of substitution between two periods?

A

MRS = the cost of transfer between periods, which = return on capital

198
Q

Labour and consumption tax in the two period model

A

Can be set to be equivalent in terms of consumption and behavioural distortion

199
Q

What is the effect of a tax on savings/wealth?

A

Less spending in the second period, equivalent to a fall in the return on capital

200
Q

How do “lenders” and “borrowers” differ when the interest rate changes?

A

The income effect acts positively for lenders, and negatively for a borrower

201
Q

What are the impacts of capital (savings) taxes on overall changes?

A

Always ambiguous, due to borrowers and lenders cancelling each other out

202
Q

Behavioural responses to inheritance tax

A

Reduced wealth accumulation, reduces labour supply of donors, increases labour supply of donees (due to income effects)

Public Econ (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions