內(nèi)容參考案例2013sv

1、Lecture 11Targeted entitlements and incentivesRecapSocial insurance necessary to maximize welfare.Partial insurance is superior to complete insurance due to the leaky bucket of redistribution.Moral hazard complicates the design of social insurance.Public-policy responses find it difficult to balance

2、 social justice and labor participation. 2OutlineUnemployment benefitsInvoluntary unemploymentPayment of benefits over timeWage subsidy3Targeted entitlements and incentivesDirected at people in need. (welfare payments; unemployment benefits; housing and food benefits)How can public policy resolve th

3、e moral hazard problem that arise because of the benevolence of the state? UI provides e conditional on having had a job. The entitlements apply when unemployment is considered involuntary and is predicted to be temporary. 4Causes of involuntary unemploymentMinimum wage: For low-skilled people, prod

4、uctivity may be lower than the minimum wage. No employer would give them a job. 5Causes of involuntary unemploymentMinimum wage and unemployment is US states6Causes of involuntary unemploymentEffect of minimum wage of unemployment (meta-study)7Causes of involuntary unemployment8Why does the minimum

5、wage have little effect on unemployment? Following an increase in the minimum wage. (source: Schmitt, 2013, CEPR)Employers may cut hours but not employmentEmployers may cut wages of high-skilled workersEmployers may improve organizational efficiencyWorkers may work harderEmployers and workers may fo

6、llow various adjustment paths.Causes of involuntary unemploymentMinimum wages are not particularly high.9Causes of involuntary unemploymentInsider-outsider theory: workers unions within firms are pushing for higher salaries. This restricts demand for labor and leads to unemployment.Helps explain US-

7、Europe unemployment rate differential.Efficiency wages: employers provide high wages to employees to motivate them to work. This creates unemployment because the wages paid are in excess of the wages that would equal labor supply and demand.10Benefits of unemployment insuranceSocial justice: compens

8、ation for people with temporary (or permanent) loss of e. Only the government can provide UI.Efficient job search: UI gives people time to look for a suitable job, rather than accept an unsuitable offer. UI improves the matching between jobseekers and jobs.Problem: Moral hazard: UI affect the effort

9、 that people put into keeping and finding jobs. Solution: limit unemployment insurance to a specific period. 11Payment of benefits over time12Payment of benefits over time13Policy A: constant payout. Because of the value of leisure, no job offer is accepted until benefits cease.Policy B: declining p

10、ayout. Compared with policy A, jobs offers will be accepted sooner.Policy B deals better with moral hazard, but governments sometimes provide the constant payout of policy A.Payment of benefits over timeNet Replacement Rates over a five year period. (OECD)14Inactivity trapsEffective tax rate for tra

11、nsition from unemployed to work. (selected sub-group, OECD). Because of e tax, the net salary may not be much higher than benefits.15 e support contingent on workWhen welfare payments provide es contingent on not working, people may be capable of working, but labor-market es that can be earned are s

12、ometimes very low. How can public policy encourage people who are capable of working to choose to work?Alternative public policy: Wage subsidy. What if welfare support is made contingent on work? 16 e support contingent on work17 e support contingent on work18Public policy can be changed from welfar

13、e payment to wage subsidy that ensures that the e is ymin. Subsidy of s dollars/hour.The individual chooses L1.The subsidy is set to provide the same e ymin that was provided in form of welfare payment. Examples of wage subsidyBritain, 2012High youth unemployment rate, especially in deprived areas.W

14、age subsidy for hiring 18-24 y.o. in 20 deprived areas.Singapore, 2013The government offers to reimburse of pay increases for e workers.Wage subsidies should and tend to be targeted at specific groups.19 e support contingent on workWhat does the recipient prefer? A welfare payment or a wage subsidy?

15、A welfare payment ymin is preferred because he does not have to work.The transfer recipient loses from a change from a welfare policy to a wage subsidy because of the loss of leisure.The area CBL1O measures the loss of leisure.To compensate the recipient, the wage subsidy would have to be greater th

16、an s, say s. s is s.t. the area ABC is exactly equal to receiving ymin without working. 20 e support contingent on workTaxpayers prefer wage subsidy.With welfare payment, taxes of ABL1O are needed to provide e ymin.Wage subsidy lowers taxes by ABDw.Denote by person 1 the transfer recipient, and pers

17、on 2 the taxpayer. Social welfare is:If the weight placed on the transfer recipient is high compared to the weight place on the taxpayer, then welfare payment is preferred to wage subsidy. 21Revision22Module structureThe role of government The growth of the government L1 Public goods L2 Externalitie

18、s L3Public choiceTheory of voting L4 Political business cycle L523Welfare and public policy Social justice L9 & L10 Entitlements L11Taxation e tax, consumption tax L6 Optimal taxation & tax incidence L7 Fiscal decentralization L8Growth of the public sectorBackground: Growth of public spending24Wagne

19、rs lawBaumols lawExternalitiesRegulationDemand sideSupply sidePolitical reasons Demand for redistribution Ratchet effects FairnessPublic goodsEfficient provisionMarket provisionvs.25Public goodsExperimental evidencePrivate contribution 026Private contribution declinesConditional cooperationExternali

20、tiesMarket efficiency, DWL27ExternalitiesPolicy?TaxationRegulation/ quota28Steep SMBFlat SMBExample: Global warming What policy options exist, how efficient they are etc. QRPR0MD = SMBR1PMC1RFullMore pollutionPFull0PMC2R3Tax=MD29Optimal reductionVoting30How to aggregate individual preferences?Majori

21、ty ruleCondorcet winnerCyclingMedian voter theoremSingle-peaknessImplications(1)(1)(1)XYZYZXZXYVoting31Plurality votingBorda votingTwo round votingSelects Condorcet winner?Increased popularity and defeat(6)(5)(6)ABCBCBCAASelects Condorcet winner?Strategic votingApproval votingSelects Condorcet winne

22、r?Strategic votingSelects Condorcet winner?Voting32Representative democracyMedian voter theoremOstrogorskis paradoxPolitical business cycle?Opportunistic politics modelPartisan politics modelTaxation33How to finance the growing public sector? e taxationSituation in ChinaTheoryEvidenceChinaJapanUSUKP

23、ersonal e tax7%19%38%29%Profit tax21%17%11%9%Good and services65%19%16%28%Property1%9%11%12%Policy implicationsTaxation34How to finance the public sector?ConsumptiontaxationSituation in ChinaRamsey ruleWelfare implicationsLaffer curveTax incidenceFiscal decentralization35Decentralization reforms in

24、ChinaAssignmentsNo Fiscal autonomyShortfallsTransfersArguments for/against decentralization TieboutSuperior informationCommon-poolExternalitiesFiscal competitionEconomies of scaleHistory of reformsCritical assessmentPublic choice and economic perspectiveFiscal decentralization36Decentralization and

25、economic growthIncentive effectsDecentralization and inequality Unequal tax base Fiscal competition+ Shen, Jin and ZhouSocial insurance37Leaky bucketVeil of ignorance, risk-aversionInequalityImpact of SISocial insurance38Moral hazardFlexicurityUS vs. EuropeUnemployment benefitsPayments over timeWage

26、 subsidyWhat we have learnedTheory + empirical evidenceContrast between theory and practiceExternalitiesPublic goodsRamsey ruleSocial insurance and moral hazardImplications for China39Exam structure402-hour exam.Answer 2 essay questions from 5. Questions are broad1 hour/QDo NOT reproduce prepared es

27、says without regard to what the question asksBefore you answerChoose to answer only those questions you fully understandYour AnswerThe Main Body of argument should follow, with evidence, examples etc used to support statementsShould have a clear structureThe Introduction should act as a signpost to the readerA (brief) Conclusion should end the essayGood PracticeUse examples whenever possible to support argumentsDefine technical terms as you i