Economics 232: Government Expenditures,
Redistribution and Social Insurance
Fall 2014 


Our first regular lecture will take place on Thurday October 9th. We will NOT be having our regularly scheduled lecture on October 2nd.


  • Syllabus

  • Reading list

    ** indicates required reading

    I. Redistribution

    A. Justification for government involvement (Read as interested)

    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. A. Alesina and P. Guiliano. 2009. Preferences for redistribution. NBER WP 14825.

    E. Barth and K. Moene. 2009. The equality multiplier. NBER WP 15076.

    I. Kuziemko, R. Buell, T. Reich, and M. Norton. 2011. Last place aversion: evidence and redistributive implications. NBER WP 17234.

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

    J. Heathcote, F. Perri, G. Violante. 2009. Unequal we stand: an empirical analysis of economic inequality in the United States, 1967-2006. NBER WP 15483.

    R. Burkhauser and K. Simon. 2010. Measuring the impact of health insurance on levels and trends in inequality. NBER WP 15811.

    ** B. Meyer and J. Sullivan. 2009. Five decades of consumption and income poverty. NBER WP 14827.

    B. Meyer and J. Sullivan. 2011. Consumption and income poverty over the business cycle. NBER WP 14827.

    B. Meyer and J. Sullivan. 2013. Winning the War: Poverty from the Great Society to the Great Recession cycle. NBER WP 18718.

    H. Hoynes, M. Page, and A. Stevens. 2006. Poverty in America: trends and explanations. Journal of Economic Perspectives 20(1):47-68.

    ** D. Katz, L. and K. Murphy. 1992. Changes in relative wages, 19631987: supply and demand factors. Quarterly Journal of Economics 107(1): 35-78..

    ** D. Autor, L. Katz, and M. Kearney. 2008. Trends in U.S. Wage Inequality: Revising the Revisionists. Review of Economics and Statistics 90(2):300-323.

    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.

    ** Moffitt, Robert A. The Negative Income Tax and the Evolution of US Welfare Policy.. Journal of Economic Perspectives 17.3 (2003): 119-140.

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

    R. Moffitt and J. Scholz. 2009. Trends in the level and distribution of income support. NBER WP 15488.

    Y. Ben-Shalom, R. Moffitt and J. Scholz. 2011. An assessment of the effectiveness of anti-poverty programs in the United States. NBER WP 17042.

    C. Mulligan. 2011. The expanding social safety net. NBER WP 17654.

    D. Program design

    ** 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.

    ** J. Currie and F. Gahvari. 2008. Transfers in cash and in-kind: theory meets the data, Journal of Economic Literature 46(2):333-83 (NBER WP 13557).

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

    ** 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.

    H. Kleven and W. Kopczuk. 2011. Transfer program complexity and the take-up of social benefits. American Economic Journal: Economic Policy (3):54-90.

    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.

    ** G. Dahl et al. 2013. What Is the Case for Paid Maternity Leave, NBER WP 19595.

    ** G. Dahl and L. Lochner. 2012. The Impact of Family Income on Child Achievement: Evidence from Changes in the Earned Income Tax Credit, American Economic Review, 102(5): 19271956.

    E. Program evaluation methods (Reading from this section is generally encouraged)

    G. Imbens and J. Wooldridge. 2007. What's new in econometrics. NBER Summer Institute Minicourse.

    ** E. Duflo, R. Glennerster and M. Kremer. 2006. Using randomization in development economics research: a toolkit. NBER Technical WP 333, pp.4-17.

    ** J. Dinardo and D. Lee. 2010. Program evaluation and research designs. NBER WP 16016.

    ** G. Burtless and L. Orr. 1986. Are Classical Experiments Needed for Manpower Policy?. Journal of Human Resources. Fall86, Vol. 21 Issue 4, p606-639.

    ** J. Dinardo and D. Lee. 2010. Program evaluation and research designs. NBER WP 16016.">The experimental approach to development economics. NBER WP 14467.

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

    R. LaLonde. 1986. Evaluating the Econometric Evaluations of Training Programs with Experimental Data. American Economic Review 76(4):604-620.

    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.

    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. 1997. Instrumental variables: a study of the implicit behavioral assumptions used in making program evaluations. Journal of Human Resources 32(3):441-62.

    P. Carneiro, J. Heckman and E. Vytlacil. 2009. Evaluating marginal policy changes and the average effect of treatment for individuals at the margin. NBER WP 15211.

    D. Card, D. Lee and Z. Pei. 2009. Quasi-experimental identification and estimation in the regression kink design. Princeton University Industrial Relations Section WP 553.

    F. Evidence on the impact of transfer programs

    ** R. Moffitt. 2002. Welfare programs and labor supply. In Auerbach and Feldstein, eds., Handbook of Public Economics 4 (Elsevier), pp.2393-2430 (NBER WP 9168).

    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.

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

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

    R. Chetty. 2008. Sufficient statistics for welfare analysis: a bridge between structural and reduced-form methods. NBER WP 14399.

    ** 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. 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.

    ** H. Hoynes and D. Schanzenbach. 2012. Work incentives and the food stamp program. Journal of Public Economics 96(1-2):151-62.

    N. Maestas, K. Mullen, and A. Strand. 2011. Does disability insurance receipt discourage work? Using examiner assignment to estimate causal effects of SSDI receipt. RAND WR-853.

    ** 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):159-208.

    J. Cunha, G. De Giorgi, S. Jayachandran. 2011. The price effects of cash versus in-kind transfers. NBER WP 17456.

    ** D. Cutler and J. Gruber. 1996. Does Public Insurance Crowd Out Private Insurance. Quarterly Journal of Economics 111(2):391-430.

    ** J. Currie and J. Gruber. 1996. Health Insurance Eligibility, Utilization of Medical Care, and Child Health. Quarterly Journal of Economics 111(2):431-466.

    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.

    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.

    R. Chetty and A. Finkelstein. 2012. Social insurance: connecting theory to data. NBER WP 18433.

    R. Chetty and E. Saez. 2008. Optimal taxation and social insurance with endogenous private insurance. NBER WP 14403.

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

    B. Handel. 2011. Adverse selection and switching costs in health insurance markets: when nudging hurts. NBER WP 17459.

    J. Cogan, R. Hubbard, D. Kessler. 2008. The effect of Medicare coverage for the disabled on the market for private insurance. NBER WP 14309.

    L. Einav and A. Finkelstein. 2011. Selection in insurance markets: theory and empirics in pictures. NBER WP 16723.

    ** 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. American Economic Review 98(2):157-62.

    L. Gan, F. Huang, A. Mayer. 2011. A simple test for private information in insurance markets with heterogeneous insurance demand. NBER WP 16738.

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

    B. Financing social insurance

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

    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.

    ** J. Kolstad and A. Kowalski. 2012. Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform. NBER WP 17933.

    C. Colla, W. Dow, and A. Dube. 2011. The labor market impact of employer health benefit mandates: evidence from San Francisco's health care security ordinance. NBER WP 17198.

    C. Unemployment insurance: optimal program design and empirical evidence

    ** 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.

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

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

    C. Landais, P. Michaillat, and E. Saez. 2010. Optimal unemployment insurance over the business cycle. NBER WP 16526.

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

    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.

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

    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.

    ** R. Lalive, J. van Ours, J. Zweimuller. 2006. How changes in financial incentives affect the duration of unemployment. Review of Economic Studies 73(4):1009-1038.

    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.

    A. Krueger and A. Mueller. 2010. Job search and unemployment insurance: new evidence from time use data. Journal of Public Economics 94(3-4):298-307.

    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.

    K. Kroft and M. Notowidigdo. 2011. Should unemployment insurance vary with the unemployment rate? Theory and evidence. NBER WP 17173.

    P. Anderson and B. Meyer. 1997. Unemployment insurance take-up rates and the after-tax value of benefits. Quarterly Journal of Economics 112:913-38.

    D. Acemoglu and R. Shimer. 2000. Productivity gains from unemployment insurance. European Economic Review (44):1195-1224.

    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.

    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.

    ** 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.

    ** 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.

    D. Social Security Retirement and Disability Insurance

    ** 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.

    ** J. Liebman et al. 2008. Labor Supply Responses to Marginal Social Security Benefits: Evidence from Discontinuities. NBER WP 14540.

    ** D. Autor and M. Duggan. 2001. The Rise in Disability Recipiency and the Decline in Unemployment. NBER WP 8336.

    E. Health-Based Social Insurance: the demand and supply sides of optimal design

    ** D. Cutler. 2002. Health Care and the Public Sector. NBER WP 8802.

    Manning et al. 1987. Health Insurance and the Demand for Medical Care: Evidenced from a Randomized Experiment The American Economic Review 77(3): 251-277.

    ** A. Finkelstein, S. Taubman, et al. 2011. The Oregon health insurance experiment: evidence from the first year. NBER WP 17190.

    J. Clemens. 2011. Regulatory redistribution in the market for health insurance. NBER WP 19904.

    ** M. Hackman et al. 2013. Adverse Selection and an Individual Mandate: When Theory Meets Practice. NBER WP 19149.

    J. Clemens and J. Gottlieb. 2013. Bargaining in the Shadow of a Giant: Medicare's Influence on Private Payment Systems. NBER WP 19503.

    ** A. Finkelstein. 2003. Health Policy and Technological Change: Evidence from the Vaccine Industry. NBER WP 9460.

    E. Budish et al. 2013. Do fixed patent terms distort innovation? Evidence from cancer clinical trials. NBER WP 19430.

    J. Clemens. 2013. The Effect of U.S. Health Insurance Expansions on Medical Innovation. NBER WP 19761.

    K. Baicker et al. 2012. Behavioral Hazard in Health Insurance. NBER WP 18468.

    ** C. Garthwaite et al. 2012. Public Health Insurance, Labor Supply, and Employment Lock. NBER WP 19220.

    ** A. Chanrda et al. 2007. Patient Cost-Sharing, Hospitalization Offsets, and the Design of Optimal Health Insurance for the Elderly. NBER WP 12972.