Introduction A key policy question is how do households respond to the incentives presented in the U.S. tax code? We will examine: Labor supply -Saving Housing Portfolio Composition
Optimal Commodity Taxation Assume that the goal is to finance expenditures with a minimum of excess burden. Assume lump sum taxes are infeasible 3 commodities: Good X. Y, and leisure
Introduction Many policies center around whether the tax burden is distributed fairly. Not as simple as analyzing how much in taxes each person actually paid, because of tax-induced changes to price
What's Special About Health Care? Health care costs are large and growing fast Number of reasons why First Welfare Theorem may be violated Poor information(physician induced demand) Adverse selection and moral hazard Disease externalities
Quick Look at Welfare Spending .\Welfare\ in the United States is a patchwork of dozens of different programs. All welfare programs are means-tested-- only individuals with sufficiently low income are eligible. Programs often have other requirements related to family structure and assets
Political Economy Defined Political Economy is the application of economic principles to the analysis of political decision making. -elf- -interestin- the marketplace, this often leads to efficiency; different implications in \political market. Maximization-one goal may be to maximize social welfare
Public Goods Defined Pure public goods share two characteristics Nonrival Cost of another person consuming the good is zero Nonexcludable-Very expensive to prevent others from consuming the good
Policy analysis is hard Why is it so hard to tell what's going on with government actions? Consider lowering income tax rates. Will lowering taxes increase work effort and labor supply? · Unlike the physical and natural sciences, difficult to perform carefully controlled experiments on the economy
1. Adverse selection(逆向选择) The situation that occurs when the people who are most likely to receive benefits from a certain type of insurance are the ones who are most likely to purchase it