Moreover behavioral economists have sug gested that

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Moreover, behavioral economists have sug-gested that the effects of the programs differfrom those predicted by the standard econo-mist’s model.5.Categorical programs have similar disadvantages:a.They are administratively costly.b.They are viewed by some as inequitable, asindividuals with the same income may betreated differently.c.They are sometimes distortionary, as individ-uals attempt to qualify for subsidies.However, when groups differ in their labor sup-ply responses (or other responses) to governmentprograms, the government may be able to obtaina higher degree of redistribution, for the sameloss of inefficiency, by providing categorical aid.6.The 1996 welfare reform ended the federal enti-tlement to welfare, converted the system ofmatching grants to the states to block grants,and put time limits on welfare. While there wasextensive movement from welfare to work, TANFseemed to provide (or offer safety net) for poorfamilies with children. SNAP took up an increas-ingly important role, but there are still a largefraction of children in poverty. Critics of the 1996bill argue that it did not provide adequate assis-tance for training, while advocates argue thatwhat is required is not expensive training but theacquisition of “soft skills”—good work habits—that are best acquired in the workplace.7.The lack of integration of the various welfareprograms results in high marginal tax rates,with strong adverse incentive effects. Althoughthere are proposals to “cash out” benefits andconsolidate programs, given fiscal constraints,either benefits for those with little income willfall far below the poverty threshold, or generousinitial benefits will have to be phased out quickly,resulting in high marginal tax rates.KEY CONCEPTSAid to Families with Dependent Children (AFDC)Block grantsCash welfare programCategorical programsChildren’s Health Insurance Program (CHIP)Conditional cash transfers (CCTs)Earned Income Tax Credit (EITC)Eligibility requirementsEmpowerment Zone (EZ)Entitlement programsFood stampsIn-kind benefi tsLow-Income Home Energy Assistance Program(LIHEAP)Matching programs
468CHAPTER 15WELFARE PROGRAMS AND THE REDISTRIBUTION OF INCOMEMeans-testedNegative income taxPoverty ratePublic assistanceSafety netSocial insuranceSocial protectionSpecial Supplemental Nutrition Program forWomen, Infants, and Children (WIC)Supplemental Nutrition Assistance Program(SNAP)Supplemental Security Income (SSI)Temporary Assistance for Needy Families (TANF)Threshold testWelfareWelfare lockWorkfareQUESTIONS AND PROBLEMS1.It has sometimes been suggested that the govern-ment should restrict the use of SNAP assistanceto “healthful” foods. Discuss the merits of thisproposal. Assuming that it would be easy to dis-tinguish between “healthful” and “unhealthful”foods, describe the effect of such a restriction on anindividual’s consumption of the two kinds of foods.

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Term
Spring
Professor
Andras Nemeth
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