Lecture 7 - Social security Flashcards Preview

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Flashcards in Lecture 7 - Social security Deck (12)
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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.)


Reasons for in-kind transfers (3) and issue (1)

- paternalism
- specific egalitarianism: people would like to see that everyone receives adequate food, housing, etc.
- info asymmetry and better targeting: they allow targeting of recipients despite limited info (self-selection)

- it may constrain people, reducing their utility relative to receiving a cash transfer (eg. they want less food than stamps offer)