IBE316-15 - IBE 316 Economic Policy Stiglitz Economics of...

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IBE 316 Economic Policy Stiglitz: Economics of the Public Sector Chapter 15: Welfare Programs and the Redistribution of Income Keisuke OTSU Sophia University FLA Spring 2008 OTSU (Sophia University FLA) IBE 316 Spring 2008 1 / 16
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Review Social insurance insures individuals from social risk (age, unemployment, health) Social security provides basic standards of living for the elderly, disabled and their survivors indexed annuity plan, and redistribution program there are market failures for private social security Demographic issues and productivity slowdown makes it hard to maintain the pay-as-you-go system Social security has adverse e/ects on savings and labor OTSU (Sophia University FLA) IBE 316 Spring 2008 2 ± 16
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Overview Focus Questions What are the major welfare programs? What are the dimensions of the poverty problem in the United States? What is the e/ect of welfare programs on labor supply? What has been the impetus for welfare reform? OTSU (Sophia University FLA) IBE 316 Spring 2008 3 ± 16
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A Brief Description of Major Welfare Programs Temporary assistance for needy families (TANF): US, Livelihood protection: Japan Earned income tax credit (EITC): tax refund to poor people with children Food stamps Housing assistance Medicaid: US, Medical fee support system: Japan OTSU (Sophia University FLA) IBE 316 Spring 2008 4 / 16
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Rationale for Government Welfare Programs Markets may produce e¢ cient outcomes (without market failures) but may not produce a socially acceptable income distribution the government can redistribute income to achieve higher equity (2nd welfare theorem) Welfare programs can be considered as a Safety net: welfare programs eliminates the worst case scenario
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IBE316-15 - IBE 316 Economic Policy Stiglitz Economics of...

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