Flashcards in Lecture 7 - Social security Deck (12)
Types of benefits (3)
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
Means-tested welfare is...
based on an assessment of household 'means' (eg. income or wealth), paid only if they fall below a threshold
Universal benefits are...
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
Benefits policy - economic issues
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
What is an income taper?
When a means-tested benefit is reduced gradually once a threshold is passed, instead of stopping straightaway.
Universal benefits - pros and cons (5)
- 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)
Design of means-tested benefits
No taper means possible poverty trap, reduced by taper but not eliminated.
-> taper rate must be carefully thought through
Marginal tax rate =
Taper rate + income tax rate
The participation tax rate is...
the total change in taxes and benefits when someone starts work
Negative income tax/Citizens' income
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
How do in-kind transfers affect recipients' behaviour? (+ examples)
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.)