Does Medicare benefit the poor?

Measuring the progressivity of age-targeted government programs is difficult because no single data set measures income and benefit use throughout life. Previous research, using zip code as a proxy for lifetime income, has found that Medicare benefits flow primarily to the most economically advantaged groups, and that the financial returns to Medicare are often higher for the rich than the poor. However, our analysis produces the starkly opposed result that Medicare is an extraordinarily progressive public program, in dollar terms or welfare terms. These new results owe themselves to our measurement of socioeconomic status as an individual's education, rather than the geographically aggregated measures of income used by previous research. We argue that individual education has important practical and conceptual advantages over geographically aggregated measures of income. Our results suggest the crucial importance of accurate poverty measurement in evaluating the progressivity of complex government programs like Medicare or Social Security.     

Medicare for all or medicare for none? A macroeconomic analysis of healthcare reform

In this study, I develop a novel general equilibrium life cycle model composed of finitely-lived households that differ according to age, skill level, and access to employer-provided health insurance. After introducing a “Medicare for all” health insurance system to the model, I examine how the welfare response to this policy change will differ according to household characteristics. Then, I compare this system to a completely privatized health insurance system that achieves universal health insurance coverage through the creation of utilization-based premium subsidies. In general, both systems tend to improve the welfare of young households at the expense of old households. However, when using average value-of-life as the primary measure of welfare, Medicare for all either benefits unskilled households at the expense of skilled households, or makes both worse off. In contrast, the privatized system improves the average value-of-life of all household groups, regardless of skill level or prior access to employer-provided health insurance.     

From income to consumption: measuring households partial insurance

This article computes the degree of consumption insurance with respect to transitory and permanent income shocks. The lack of income–consumption data in the US surveys forces researchers to use an empirical strategy to impute consumption. This procedure is avoided by using the Spanish Household Budget Continuous Survey, which contains true panel data on consumption and income information in the same survey. We find full insurance for transitory income shocks and partial insurance for permanent shocks for some sub-groups. For the full sample, a 10% permanent income shock induces a 4.8% permanent change in consumption, with higher insurance capacity for college, home-owner and high-wealth households. We also compute the role of durables and family income transfers as smoothing devices. The comparison of insurance level when based on true consumption data versus imputed consumption data shows that the use of imputed consumption underestimates permanent insurance.     

EFFECTS OF TAXES AND BENEFITS ON INCOME DISTRIBUTION IN KOREA

This paper examines the redistributive effects of Korea's fiscal policies, including consumption taxes and in‐kind benefits. Using the Household Income and Expenditure Survey of 2007, we find that taxes and transfers reduce income inequality in Korea by 13.8 percent. Contrary to the popular belief that direct taxes are the key tool for redistribution, in‐kind benefits, direct taxes, and social security contributions all decrease the Gini coefficient by 6.7, 4.7, and 2.9 percentage points, respectively. The redistributive effect of consumption taxes is small and negative (?0.5 percentage point). Policy simulations indicate that education spending financed by the personal income tax has a positive redistributive effect and that the lower 70 percent of households enjoy positive net benefits. Spending targeting the poor has a strong redistributive effect, which implies low popularity because the majority of households face net losses.     

Community-based development and poverty alleviation: An evaluation of China's poor village investment program

We conduct the first systematic evaluation of the world's largest community-based development program—China's flagship poverty alleviation program began in 2001 which finances public investments in designated poor villages based on participatory village planning. We use matching methods and a panel household and village data set with national coverage to compare changes from 2001 to 2004 in designated poor villages that began plan investments and in designated poor villages that had yet to begin plan investments. We find that the program significantly increased both government- and village-financed investments. While the program did not increase the income or consumption of poorer households, it did increase the income and consumption of richer households by 6.1 to 9.2%. We also find suggestive evidence that governance matters in the distribution of program benefits. Relative gains were greater for richer households in villages with more educated leaders, and higher quality village committees delivered greater benefits to both richer and poorer households.     

医疗保险与消费:来自新型农村合作医疗的证据

本文利用农村引入新型农村合作医疗这一政策变化来研究医疗保险的获得对农村居民消费的影响。结果表明,新农合使得非医疗支出类的家庭消费增加了约5.6个百分点。这一正向作用随医疗保险保障水平的提高而增强,而且在没有医疗支出的家庭中仍然存在。同时,新农合对消费的正向影响在收入较低或健康状况较差的家庭中更强。这些结果都与医疗保险减少了预防性储蓄的假说相一致。另外本文发现,新农合的效果随农户在这个项目中的经历而变化。实际上只有在那些有村民获得保险补偿的村子,保险对消费的正向影响才显著,而且在这些村子中,新农合对新加入农户的消费的影响明显小于对参合一年以上农户的消费的影响。     

The extension of social security coverage in developing countries

We study the dynamic general equilibrium effects of introducing a social pension program to elderly informal sector workers in developing countries who lack formal risk sharing mechanisms against income and longevity risks. To this end, we formulate a stochastic dynamic general equilibrium model that incorporates defining features of developing countries: a large informal sector, private transfers as an informal safety net, and a non-universal social security system. We find that the extension of retirement benefits to informal sector workers results in efficiency losses due to adverse effects on capital accumulation and the allocation of resources across formal and informal sectors. Despite these losses recipients of social pensions experience welfare gains as the positive insurance effects attributed to the extension of a social insurance system dominate. The welfare gains crucially depend on the skill distribution, private intra-family transfers and the specific tax used to finance the expansion.     

Health insurance and consumption: Evidence from China’s New Cooperative Medical Scheme

We exploit a quasi-natural experiment arising from the introduction of a health insurance program in rural China to examine how the insurance coverage affects household consumption. Results show that, on average, the health insurance coverage increases nonmedical-related consumption by more than 5%. This insurance effect is observed even in households with no out-of-pocket medical spending. In addition, the insurance effect is stronger in households with worse self-reported health status. These results are consistent with the precautionary savings argument. The insurance effect also varies by household experience with the program. In particular, the effect is significant only in villages where some households have actually obtained reimbursement from the insurance program. The program within these villages stimulates less consumption among new participants than among households that have participated in the program for more than a year.     

新农保与农村低收入家庭贫困脆弱性*——基于精准扶贫背景和不同贫困标准

为考察新农保在精准扶贫时期能否降低农村低收入家庭的贫困脆弱性，本文利用2014—2018年家庭追踪调查（CFPS）数据，基于2 300元/年和每人每天32美元两类不同贫困标准衡量的贫困脆弱性指标，采用双向固定效应模型和工具变量法进行实证检验。研究发现，总体而言，缴费参与新农保对农村低收入家庭的贫困脆弱性具有显著削弱作用，但领取新农保在一定程度上加剧了农村低收入家庭的贫困脆弱程度。根据领保状态的分阶段分析发现，缴费参与新农保和缴费参保人数增加对未领保家庭和领保家庭的贫困脆弱性都具有显著改善作用，但领取新农保和领保人数对贫困脆弱性没有显著影响。异质性分析表明，缴费参与新农保可以改善健康成员家庭的贫困脆弱性，对无储蓄家庭和无借贷家庭的贫困脆弱程度具有显著缓解作用。机制检验表明，缴费参与新农保可以通过提高家庭生产性固定资产和减少代际转移，进而缓解家庭贫困脆弱性程度，而领取新农保则通过增加子女对老人的经济支持而加剧家庭贫困脆弱程度。     

THE EFFECT OF UNEMPLOYMENT BENEFITS, WELFARE BENEFITS, AND OTHER INCOME ON PERSONAL BANKRUPTCY

Personal bankruptcy, unemployment insurance, and Aid to Families with Dependent Children provide income and wealth insurance. Because they have similar purposes, it should not be surprising that some households use more than one of these programs or that the programs are substitutes. This study contributes to the personal bankruptcy literature by examining this interaction and finds that increases in unemployment benefits decrease the probability of bankruptcy. (JEL D12 , K35 )     

Optimal Income Taxation with Risky Earnings: A Synthesis

We study optimal nonlinear income taxation when earnings can differ because of both ability and luck, so the income tax has both a redistributive role and an insurance role. A substantial literature on optimal redistribution in the absence of risk has evolved since Mirrlees's original contribution. The literature on the income tax as a social insurance device is more limited. It has largely assumed that households are ex ante identical so unequal earnings are due to risk alone. We provide a general treatment of the optimal income tax under risk when households differ in ability. We characterize optimal marginal tax rates and interpret them in terms of redistribution, insurance, and incentive effects. The case of ex ante identical households and the no‐risk case with heterogeneous abilities come out as special cases.     

Evaluating the performance of means-tested benefits in Bulgaria

Using household survey data and microsimulation techniques, we analyse the performance of three means-tested benefits in Bulgaria. We find that the transfers reach a small proportion of households with incomes below a relative poverty line, they have high non take-up rates, and large proportions of the recipients are neither poor nor entitled to receive the benefits. Unsurprisingly, although an important income source for poor households, the benefits have a very small impact on reducing the poverty rates. We show that our results are robust to potential underreporting of benefit receipt in the household survey. Finally, we analyse the effect of five reform scenarios, one of which fiscally neutral, on poverty and find that there is a large scope for policy improvement.     

Anti-insurance: Analysing the Health Insurance System in Australia

This paper develops a model to analyse the Australian health insurance system when individuals differ in their health risk and this risk is private information. In Australia private insurance both duplicates and supplements public insurance. We show that, absent any other interventions, this results in implicit transfers of wealth from those most at risk of adverse health to those least at risk. At the social level, these transfers represent a mean preserving spread of income, creating social risk and lowering welfare – what we call anti-insurance. The recently introduced rebate on private health insurance can improve welfare by alleviating anti-insurance.     

Motives for household private transfers in Burkina Faso

Resource transfers among households have received considerable interest among economists in recent years. Two of the main reasons for the surge of interest in household transfers are the information on human nature conveyed by transfer behavior and the implication on income redistribution policy that private transfer might have. Empirical studies, however, provide mixed results on transfer behavior. This is because previous inquiries were confronted with several estimation issues and have focused on data from developed countries where private transfers are already small. This paper contributes to the literature on transfer behavior by using a multifaceted econometric approach to examine the motives of household transfers in Burkina, a low-income country with a well-documented tradition of gift exchanges. The findings suggest that risk sharing is not central to transfers. Altruistic transfers are apparent for the middle income class, but not at low income level. The evidence implies that crowding out may be minimal at low income level, suggesting that public transfers targeting poor households may be effective.     

How and why transition made income inequality increase in urban Russia: A local study

Using sample surveys from the city of Taganrog in 1989 and 2000, we investigate household income, its composition, and its distribution in urban Russia. Income inequality increased greatly as real income at the lowest part of the distribution decreased considerably. Earnings are more concentrated in the upper part of the income distribution in 2000 than in 1989. For many households, public transfers, allowances, private transfers, or subsidiary earned income prevented income from falling further. However, Russia did not inherit from its Soviet past an efficient progressive tax system or programs to protect jobless workers and households facing severe drops in income. Journal of Comparative Economics 33 (4) (2005) 772–787.     

THE ECONOMIC WELFARE OF THE AGED AND INCOME SECURITY PROGRAMS*

This paper examines several nonmoney components of economic welfare in both a theoretical and an empirical framework, computes the distributional ranking of aged families arising from such a measure, and subsequently examines the target effectiveness of eleven programs of the U.S. federal government aimed at the aged. While the theoretical discussion attempts to cover all factors contributing to the economic welfare of the aged, the empirical measure is somewhat less comprehensive, excluding the value of nonmarket productive activities and leisure time as well as benefits derived from direct government expenditures and some in-kind transfers and taxes. The study makes use of a subsample of the 1967 Survey of Economic Opportunity data composed of all families with at least one aged member. Specific attention is devoted to dissaving from net worth, in-kind transfers, incidence of taxes, and intrafamily transfers. Government cash and in-kind transfers are found to constitute a third of the total measured economic welfare of the aged, and the impact of each of these programs is examined individually. As might be expected, public assistance and public housing are the programs of most benefit to the aged poor. Medicaid and Medicare are substantially less so, and Social Security is distributionally neutral. Such programs as unemployment insurance are of little benefit to the aged. Tax expenditures, finally, provide no benefits to even the lower half of the distribution.     

A model of income transfers for the urban poor

In developing nations cash transfers between households play a role in maintaining poor urban families at income levels sufficient to meet expenditures on basic needs. In our analysis, a social network is seen as redistributing income to those member households who fall below a perceived basic needs threshold. This redistributive mechanism can be though of as the outcome of an implicit social contract whereby households insure themselves against the risk of falling below a perceived basic needs level. Using data from El Salvador, regression estimates which account for transfers received by poor households are found to be consistent with the proposed model.     

Avoiding the mistreatment of bad risks in a democracy: Universal Health Insurance from a constitutional perspective

This paper examines the concept that social insurance for medical care may represent a kind of constitutional choice. The long-term stability of the U.S. Medicare program indicates that such programs are rarely altered. The primary reason postulated for treating subsidized medical insurance as a constitutional choice is to guard against a temporary majority of persons in good health or not at risk for a disease voting to deny benefits for the minority who are at higher risk. It is argued, however, that, although there needs to be constitutional status for social insurance, insurance need not and probably should not take the form of tax-financed equal coverage for all.     

An Economic Analysis of Public Transfers

This paper develops simple models of public transfers. The sources of income inequality are differences in ability and in luck. The government employs a redistribution policy that arises from altruistic motives in the case of ability differences. I consider the case where the government re-optimizes income transfers after it observes the outcome of private activities. When the source of income inequality is differences in luck, the economy creates a mutual insurance or provides public goods out of risk-sharing motives. I derive the paradoxical result that a more able individual would not enjoy higher welfare than a less able individual. I also investigate how public transfers react to increases in income level and income inequality.
JEL Classification Numbers: F21, F35.