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on Public Finance |
| By: | Laurence jacquet (THEMA, Universite de Cergy-Pontoise and THEMA) |
| Abstract: | This paper studies the optimal income redistribution and optimal monitoring when disabil- ity bene?ts are intended for disabled people but some of the disabled do not claim disability bene?ts and enter the labor force. Classi?cation errors also occur. Some able applicants with high distaste for work are falsely granted disability bene?ts (type II errors) and some disabled applicants are denied disability bene?ts (type I errors). The accuracy of monitoring depends on the resources devoted to it. Labor supply responses are at the extensive margin. The paper derives the optimal income tax-transfer schedule that incorporates welfare and disability ben- e?ts and takes into account monitoring costs. The cost of monitoring and the co-existence of welfare and disability bene?ts play in favor of Earned Income Tax Credits for disabled workers who forgo disability bene?ts as well as for disabled workers who forgo welfare assistance. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2013-01&r=pub |
| By: | Andrew Beauchamp (Boston College); Mathis Wagner (Boston College) |
| Abstract: | Despite facing some of the same challenges as private insurance markets, little is known about the role of adverse selection in social insurance programs. This paper studies adverse selection in Social Security retirement choices using data from the Health and Retirement Study. We find robust evidence that people who live longer choose larger annuities by delaying the age they first claim benefits, a form of adverse selection. To quantify welfare consequences we develop and estimate a simple model of annuity choice. We exploit variation in longevity, the underlying source of private information, to identify the key structural parameters: the coefficient of relative risk aversion and the discount rate. We estimate that adverse selection reduces social welfare by 2.3-3.5 percent, and increases the costs to the Social Security Trust Fund by 2.1-2.5 percent, relative to the first best allocation. Counterfactual simulations suggest program adjustments could generate both economically significant decreases in costs and small increases in social welfare. We estimate an optimal non-linear accrual rate which would result in welfare gains of 1.4 percent, and cost reductions of 6.1 percent of current program costs. |
| Keywords: | Adverse Selection, Social Security, Optimal Policy |
| JEL: | J26 D82 |
| Date: | 2012–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:818&r=pub |
| By: | Jeffrey V. Butler; Enrica Carbone; Pierluigi Conzo; Giancarlo Spagnolo |
| Abstract: | This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. We propose a procurement model with reputation and entry assigning to the entrant a reputational advantage of varying size across treatments. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, appropriately designed reputation mechanisms actually stimulate it. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer. |
| Keywords: | Entry, Feedback mechanisms, Governance, Incomplete contracts, Limited enforcement, Incumbency, Multidimensional competition, Participation, Past performance, Procurement, Quality, Reputation, Vendor rating. |
| JEL: | H57 L14 L15 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:045&r=pub |