Economics 232: Government Expenditures,
Redistribution and Social Insurance
Winter 2008 


Announcements

None.


Class Meetings

9:30 to 10:50 Tuesday and Thursday in Economics 304.


Office Hours

By appointment, in Economics 213.


Syllabus

  • Winter 2008 syllabus


  • Reading list

    ** indicates required reading

    I. Redistribution

    A. Justification for government involvement

    L. Orr. 1976. Income transfers as a public good. American Economic Review 66:359-71.

    H. Varian. 1980. Redistributive taxation as social insurance. Journal of Public Economics 14: 49-68.

    A. Atkinson. 1987. Income maintenance and social insurance. In A. Auerbach and M. Feldstein, eds., Handbook of Public Economics Volume 2 (Amsterdam: North-Holland, 1987), 779-908.

    R. Tresch. 2002. Public finance: a normative theory. San Diego, CA: Academic Press. Chapter 4, pp. 103-43.

    J. Mirrlees. 1971. An exploration in the theory of optimum income taxation. Review of Economic Studies 114: 175-208.

    B. Poverty and inequality: measurement and U.S. trends

    ** H. Hoynes, M. Page, and A. Stevens. 2005. Poverty in America: trends and explanations. Journal of Economic Perspectives 20(1):47-68 (NBER WP 11681).

    J. Hines, H. Hoynes, and A. Krueger. 2001. Another look at whether a rising tide lifts all boats. In A. Krueger and B. Solow, eds., The Roaring Nineties: Can Full Employment Be Sustained? (New York: Russell Sage Foundation).

    D. Cutler and L. Katz. 1991. Macroeconomic performance and the disadvantaged. Brookings Papers on Economic Activity 2:1-74.

    C. Transfer programs in the U.S.

    U.S. House of Representatives. Annual. Green book: background material and data on programs within the jurisdiction of the Committee on Ways and Means. Washington: U.S. Government Printing Office.

    ** R. Moffitt. 2002. Economic effects of means-tested transfers in the U.S.. NBER WP 8730.

    R. Blank and D. Ellwood. 2001. The Clinton legacy for America's poor. NBER WP 8437.

    D. Program design

    R. Moffitt. 2002. Welfare programs and labor supply. NBER WP 9168.

    ** G. Akerlof. 1978. The economics of tagging as applied to the optimal income tax, welfare programs, and manpower planning. American Economic Review 68(1): 8-19.

    A. Nichols and R. Zeckhauser. 1982. Targeting transfers through restrictions on recipients. American Economic Review 72(2):372-77.

    C. Blackorby and D. Donaldson. 1988. Cash versus kind, self-selection, and efficient transfers. American Economic Review 78: 691-700.

    S. Coate, S. Johnson, and R. Zeckhauser. 1994. Pecuniary redistribution through in-kind programs. Journal of Public Economics 55: 19-40.

    ** J. Currie and F. Gahvari. 2007. Transfers in cash and in kind: theory meets the data. NBER WP 13557.

    ** T. Besley and S. Coate. 1992. Workfare versus welfare: incentive arguments for work requirements in poverty alleviation programs. American Economic Review 82(1):249-61.

    R. Moffitt. 2006. Welfare work requirements with paternalistic government preferences. Economic Journal 116(515):F441-58.

    T. Besley and S. Coate. 1995. The design of income maintenance programmes. The Review of Economic Studies 62:187-221.

    E. Saez. 2002. Optimal income transfer programs: intensive versus extensive labor supply responses. Quarterly Journal of Economics 117: 1039-73.

    P. Beaudry, C. Blackorby and D. Szalay. 2006. Taxes and employment subsidies in optimal redistribution programs. The Warwick Economics Research Paper Series.

    L. Kaplow. 2007. Optimal income transfers. International Tax and Public Finance 14(3):295-325.

    E. Program evaluation methods

    ** R. LaLonde. 1986. Evaluating the Econometric Evaluations of Training Programs with Experimental Data. American Economic Review 76:604-620.

    G. Burtless and L. Orr. 1986. Are classical experiments needed for manpower policy? Journal of Human Resources 21: 606-639.

    J. Kling. 2007. Methodological frontiers of public finance field experiments. National Tax Journal 60(1):109-27.

    O. Ashenfelter and D. Card. 1985. Using the longitudinal structure of earnings to estimate the effect of training programs. Review of Economics and Statistics 67: 648-660.

    ** J. Heckman and V. Hotz. 1989. Choosing among alternative non-experimental methods for estimating the impact of social programs: the case of manpower training. Journal of the American Statistical Association 94:1053-62.

    R. Dehejia and S. Wahba. 1999. Causal effects in non-experimental studies: re-evaluating the evaluation of training programs. Journal of the American Statistical Association 94: 1053-62.

    J. Angrist, G. Imbens, and D. Rubin. 1996. Identification of causal effects using instrumental variables. Journal of the American Statistical Association 91: 444-472.

    ** J. Heckman. 1998. Instrumental variables: a study of the implicit behavioral assumptions used in making program evaluations. Journal of Human Resources 32(3):441-62.

    L. Friedberg. 2000. The labor supply effects of the Social Security earnings test. Review of Economics and Statistics 82(1):48-63.

    F. Evidence on the impact of transfer programs

    ** R. Moffitt. 1992. Incentive Effects of the U.S. Welfare System: A Review. Journal of Economic Literature 30:1-61.

    H. Hoynes. 1997. Does welfare play any role in female headship decisions? Journal of Public Economics 65(2): 89-117.

    B. Meyer. 2000. Do the poor move to receive higher welfare benefits? Northwestern University Working Paper.

    ** R. Moffitt. 1983. An economic model of welfare stigma. American Economic Review 73(5):1023-1035.

    ** M. Bitler, J. Gelbach, and H. Hoynes. 2006. What mean impacts miss: distributional effects of welfare reform experiments. American Economic Review 96(4):988-1012.

    ** F. Mazzolari. 2007. Welfare use when approaching the time limit. Journal of Human Resources 42(3):596-618.

    ** B. Meyer and D. Rosenbaum. 2001. Welfare, the earned income tax credit, and the labor supply of single mothers. Quarterly Journal of Economics 116(3): 1063-1114.

    T. Lemieux and K. Milligan. 2008. Incentive effects of social assistance: a regression discontinuity approach. Journal of Econometrics 142(2):807-838.

    B. Meyer and J. Sullivan. 2001. The effects of welfare and tax reform: the material well-being of single mothers in the 1980s and 1990s. NBER WP 8298.

    ** A. Aizer. 2007. Public health insurance, program take-up and child health. Review of Economics and Statistics 89(3):400-415. (Note: link is to an earlier version.)

    ** J. Currie and A. Yelowitz. 2000. Are public housing projects good for kids?. Journal of Public Economics 75:99-124.

    ** J. Ludwig and D. Miller. 2007. Does Head Start improve children's life chances? Evidence from a regression discontinuity design. Quarterly Journal of Economics 2007(1):159-2008.

    II. Social Insurance

    A. Justification for government involvement

    M. Feldstein. 2005. Rethinking social insurance. American Economic Review 95(1):1-24.

    ** M. Rothschild and J. Stiglitz. 1976. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information. The Quarterly Journal of Economics 90(4):629-649.

    C. Wilson. 1980. The nature of equilibrium in markets with adverse selection. Bell Journal of Economics (Spring): 108-130.

    ** A. Finkelstein. 2002. When can partial public insurance produce Pareto improvements?. NBER WP 9035.

    D. Cutler and R. Zeckhauser. 1998. Adverse selection in health insurance. Forum for Health Economics & Policy 1(1):1056-1056.

    D. de Meza and D. Webb. 2001. Advantageous selection in insurance markets. The RAND Journal of Economics 32(2):249-62.

    ** A. Finkelstein and K. McGarry. 2006. Multiple dimensions of private information: evidence from the long-term care insurance market. American Economic Review 96(4):938-58.

    D. Cutler, A. Finkelstein, K. McGarry. 2008. Preference heterogeneity and insurance markets: explaining a puzzle of insurance. NBER WP 13746.

    B. Cost of government involvement

    S. Shavell. 1979. On moral hazard and insurance. Quarterly Journal of Economics 93: 541-562.

    W. Jack. 2002. Equilibrium in competitive insurance markets with ex ante adverse selection and ex post moral hazard. Journal of Public Economics 84(2):251-78.

    C. Financing social insurance

    L. Summers. 1989. Some simple economics of mandated benefits. American Economic Review 79: 177-184.

    P. Fishback and S. Kantor. 1995. Did workers pay for the passage of workers' compensation laws? Quarterly Journal of Economics 110: 713-742.

    W. Viscusi and M. Moore. 1987. Workers' Compensation: wage effects, benefit inadequacies, and the value of health losses. The Review of Economics and Statistics 69(2):249-61.

    ** J. Gruber. 1994. The incidence of mandated maternity benefits. American Economic Review 84(3):622-41.

    D. Unemployment insurance: optimal program design

    W. Chiu and E. Karni. 1998. Endogenous adverse selection and unemployment insurance. Journal of Political Economy 106:806-27.

    M. Baily. 1978. Some aspects of optimal unemployment insurance. Journal of Public Economics 10:379-402.

    ** R. Chetty. 2006. A general formula for the optimal level of social insurance. Journal of Public Economics 90(10-11):1879-1901.

    R. Shimer and I. Werning. 2007. Reservation wages and unemployment insurance. Quarterly Journal of Economics 122(3):1145-85.

    D. Acemoglu and R. Shimer. 1999. Efficient unemployment insurance. Journal of Political Economy 107(5):893-928.

    S. Shavell and L. Weiss. 1979. The optimal payment of unemployment insurance benefits over time. Journal of Political Economy 87(6):1347-62.

    R. Shimer and I. Werning. 2006. On the optimal timing of benefits with heterogeneous workers and human capital depreciation. NBER WP 12230.

    P. Cahuc and E. Lehmann. 2000. Should unemployment benefits decrease with the unemployment spell. Journal of Public Economics 77:135-53.

    M. Feldstein and D. Altman. 1998. Unemployment insurance savings accounts. NBER WP 6860.

    E. Unemployment insurance: evidence on worker behavior

    ** N. Keifer. 1988. Economic duration data and hazard functions. Journal of Economic Literature 26(2): 646-79.

    ** B. Meyer. 1990. Unemployment insurance and unemployment spells. Econometrica 58: 757-782.

    B. Meyer. 1989. A quasi-experimental approach to the effects of unemployment insurance. NBER WP 3159.

    L. Katz and B. Meyer. 1990. The impact of potential duration of unemployment benefits on the duration of unemployment. Journal of Public Economics 41:45-72.

    D. Card and P. Levine. 2000. Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit Program. Journal of Public Economics 78(1-2):107-138.

    D. Card, R. Chetty and A. Weber. 2007. The spike at benefit exhaustion: leaving the unemployment system or starting a new job? American Economic Review Papers and Proceedings 97:113-8.

    D. Black, J. Smith, M. Berger and B. Noel. 2003. Is the threat of reemployment services more effective than the services themselves? Evidence from UI system using random assignment." American Economic Review 93(4):1313-27.

    O. Ashenfelter, D. Ashmore and O. Deschenes. 2005. Do unemployment insurance recipients actively seek work? Evidence from randomized trials in four U.S. states. Journal of Econometrics 125(1-2):53-75.

    S. Woodbury and R. Spiegelman. 1987. Bonuses to workers and employers to reduce unemployment: randomized trials in Illinois. American Economic Review 77:513-30.

    B. Meyer. 1996. What have we learned from the Illinois reemployment bonus experiments. Journal of Labor Economics 14: 26-51.

    B. Meyer. 1995. Lessons from the U.S. Unemployment insurance experiments. Journal of Economic Literature 33:91-131.

    C. O'Leary, P. Decker and S. Wandner. 2005. Cost-effectiveness of targeted reemployment bonuses. Journal of Human Resources 40(1):270-9.

    P. Levine. 1993. Spillover effects between the insured and uninsured employed. Industrial and Labor Relations Review 47(1): 73-86.

    B. Blank and D. Card. 1997. Unemployment insurance take-up rates and the after-tax value of benefits. Quarterly Journal of Economics 112:913-38.

    S. Jones and P. Kuhn. 1995. Mandatory notice and unemployment. Journal of Labor Economics 13(4):599-622.

    J. Gruber. 1997. The consumption smoothing benefits of unemployment insurance. American Economic Review 87(1):192-205.

    J. Cullen and J. Gruber. 2000. Does unemployment insurance crowd out spousal labor supply? Journal of Labor Economics 18: 546-72.

    M. Browning and T. Crossley. 2001. Unemployment insurance benefit levels and consumption changes. Journal of Public Economics 80(1):1-23.

    ** R. Chetty. 2004. Optimal unemployment insurance when income effects are large. NBER WP 10500.

    R. Chetty. 2008. Moral hazard vs. liquidity and optimal unemployment insurance. UC-Berkeley draft.

    F. Unemployment insurance: employers

    P. Anderson and B. Meyer. 1993. The unemployment insurance payroll tax and interindustry and interfirm subsidies. In J. Poterba, ed. Tax Policy and the Economy 7, 111-144.

    P. Anderson and B. Meyer. 2000. The effects of the unemployment insurance payroll tax on wages, employment, claims, and denial. Journal of Public Economics 78:81-106.

    M. Feldstein. 1976. Temporary layoffs in the theory of unemployment. Journal of Political Economy 84: 937-958.

    M. Feldstein. 1978. Effect of unemployment insurance on temporary layoff unemployment. American Economic Review 68: 834-46.

    ** R. Topel. 1983. On layoffs and unemployment insurance. The American Economic Review 73(4):541-559.

    G. Betcherman and N. Leckie. 1995. Employer responses to UI experience rating: evidence from Canadian and American establishments. Human Resources Development Canada Research Paper.

    G. Social Security

    ** M. Feldstein and J. Liebman. 2001. Social Security. NBER WP 8451.

    J. Gruber and D. Wise, eds. 2004. Social Security and Retirement around the World. Chicago: University of Chicago Press.