GPP 501 Microeconomic Analysis for Public Policy Fall 2017

Transcription

1 GPP 501 Microeconomic Analysis for Public Policy Fall 2017 Given by Kevin Milligan Vancouver School of Economics University of British Columbia Lecture October 4th: Redistribution empirical evidence GPP501: Lecture Oct 4 1 of 34

2 Agenda for today: 1. Incentives: Social Assistance in Quebec. 2. Incentives: Child benefits in Canada 3. Incentives: Disability Insurance in US 4. Incentives: High income taxation in US 5. Benefits: Child benefits in Canada 6. Benefits: Public Pensions in Canada. GPP501: Lecture Oct 4 2 of 34

3 Example 1: Social Assistance in Quebec "Incentive effects of social assistance: A regression discontinuity approach," Thomas Lemieux and Kevin Milligan Journal of Econometrics, Vol. 142, No. 2 (February 2008), pp [Link] Research question: Do social assistance payments affect decision to work? What does theory say? Think of the static labour supply model from last time. GPP501: Lecture Oct 4 3 of 34

4 Example 1: Social Assistance in Quebec Payments for those under 30 without kids were substantially smaller until August 1989 GPP501: Lecture Oct 4 4 of 34

5 Example 1: Social Assistance in Quebec Compare employment rates ages vs 30-34, Que vs RoC GPP501: Lecture Oct 4 5 of 34

6 Example 1: Social Assistance in Quebec Compare employment rates In Quebec 1986 by age. GPP501: Lecture Oct 4 6 of 34

7 Example 2: Child Benefits in Canada "The integration of child tax credits and welfare: Evidence from the Canadian National Child Benefit program" Kevin Milligan and Mark Stabile, Journal of Public Economics, Vol. 91, No. 1-2 (February, 2007), pp [link] Research question: Do in-work benefits encourage employment? What does theory say? Think of the static labour supply model from last time. GPP501: Lecture Oct 4 7 of 34

8 Example 2: Child Benefits in Canada The new NCB was deducted $ for $ from provincial social assistance. Effectively allowed you to carry part of your social assistance cheque into the labour market. Moved from Xo to X 1 GPP501: Lecture Oct 4 8 of 34

9 Example 2: Child Benefits in Canada Analyze intro / expansion of National Child Benefit system in 1990s. Amounts varied by family size; introduced in Some provinces deducted this from Social Assistance payments. Some didn t. GPP501: Lecture Oct 4 9 of 34

10 Example 2: Child Benefits in Canada Single males and females: Employment rates Source: Labour Force Survey GPP501: Lecture Oct 4 10 of 34

11 Example 2: Child Benefits in Canada What impact on Social Assistance receipt? (Binary 1/0 indicator) GPP501: Lecture Oct 4 11 of 34

12 Example 2: Child Benefits in Canada What impact on Social Assistance receipt? (Earnings 1/0 indicator) GPP501: Lecture Oct 4 12 of 34

13 Example 2: Child Benefits in Canada What impact on Social Assistance receipt? (Transfers major source 1/0 indicator) GPP501: Lecture Oct 4 13 of 34

14 Example 2: Child Benefits in Canada What impact on Earnings receipt? (Earnings major source 1/0 indicator) GPP501: Lecture Oct 4 14 of 34

15 Example 3: Disability Insurance in US "Push and Pull: Disability Insurance, Regional Labor Markets, and Benefit Generosity in Canada and the United States" Kevin Milligan and Tammy Schirle. NBER Working Paper No , May [Link] Research Question: Do more generous transfers change labour supply decisions? What does theory say? Think of the static labour supply model from last time. GPP501: Lecture Oct 4 15 of 34

16 Example 3: Disability Insurance in US DI pays you a monthly amount if you qualify as disabled. The amount is geared to average earnings. GPP501: Lecture Oct 4 16 of 34

17 Example 3: Disability Insurance in US Biggish increase between 1996 and 2006; increase slows 2006 to GPP501: Lecture Oct 4 17 of 34

18 Example 3: Disability Insurance in US Biggish increase between 1996 and 2006; increase slows 2006 to GPP501: Lecture Oct 4 18 of 34

19 Example 4: Taxing Top Incomes in Canada "Taxation and Top Incomes in Canada," Kevin Milligan and Michael Smart Canadian Journal of Economics, Vol. 48, No. 2 (2015), pp [link] Research question: Do high earners report lower income when tax rates go up? Theory: We expect reported income to go down: real responses avoidance responses GPP501: Lecture Oct 4 19 of 34

20 Example 4: Taxing Top Incomes in Canada Try to get estimates of taxable income elasticity for Canada. Q: Why might Canadian elasticity be different? Exploit differences in tax rates across provinces and years Q: Is there a difference between provincial and federal elasticity? Focus on period from 1988 to Discard because of 1988 tax reform. Q: why might tax reform matter? GPP501: Lecture Oct 4 20 of 34

21 Example 4: Taxing Top Incomes in Canada Top tax rates across provinces GPP501: Lecture Oct 4 21 of 34

22 Example 4: Taxing Top Incomes in Canada Scatterplot: top 1% share vs. top tax rates GPP501: Lecture Oct 4 22 of 34

23 Example 4: Taxing Top Incomes in Canada Results for different income groups (1) (2) (3) (4) P90 P95 P99 P99.9 Observations R-squared Log (1-MTR) *** 1.451*** [0.219] [0.218] [0.238] [0.541] Log Total 0.424*** 0.511*** 0.729*** 0.893*** Income [0.0533] [0.0636] [0.0767] [0.162] GPP501: Lecture Oct 4 23 of 34

24 Example 5: Child Benefits in Canada "How do families who receive the CCTB and NCB spend the money?" Kevin Milligan, Lauren Jones, and Mark Stabile. Martin Prosperity Institute Research Paper April 20, [link] Research Question: Do increased child tax benefits change consumption patterns? Theoretical prediction: Expect more spending; not sure on what. GPP501: Lecture Oct 4 24 of 34

25 Example 5: Child Benefits in Canada Big expansions at lower incomes over last 20 years. GPP501: Lecture Oct 4 25 of 34

26 Example 5: Child Benefits in Canada Big expansions at lower incomes over last 20 years. GPP501: Lecture Oct 4 26 of 34

27 Example 5: Child Benefits in Canada Spending change for an extra $ of benefits GPP501: Lecture Oct 4 27 of 34

28 Example 5: Child Benefits in Canada Spending change for an extra $ of benefits GPP501: Lecture Oct 4 28 of 34

29 Example 6: Expanded Pension Benefits "The evolution of elderly poverty in Canada," Kevin Milligan Canadian Public Policy, Vol. 34, No. 4 (November 2008). [link] Research Question: Do higher public pensions lower poverty rates? Theoretical prediction: People might adjust other income sources to smooth consumption. GPP501: Lecture Oct 4 29 of 34

30 Example 6: Expanded Pension Benefits Increase in elderly incomes since GPP501: Lecture Oct 4 30 of 34

31 Example 6: Expanded Pension Benefits Increase in elderly incomes since GPP501: Lecture Oct 4 31 of 34

32 Example 6: Expanded Pension Benefits Poverty rates decline. GPP501: Lecture Oct 4 32 of 34

33 Example 6: Expanded Pension Benefits Poverty rates decline. GPP501: Lecture Oct 4 33 of 34

34 Next Time: Deep dive into child benefits Please read. "A reset for the child tax benefit system," Kevin Milligan Inroads Journal, Issue 34, Fall [link] GPP501: Lecture Oct 4 34 of 34