Public Finance

Short answer/problem solving questions.

1. Write short noteson:
A. Unanimityrule:
B. votingparadox:
C. agendasetting:
D. medianvotertheorem:
E. logrolling:
F. porkbarrel:
G. special interest groups:
H. rent seeking:
I. iron triangle:
J. Arrow's impossibilitytheorem:

2. Are food stamps equivalent to cash for those who receive them? Explain both from the standpoint of those who receive more food stamps than they need to buy food and from the standpoint of those who must spend additional income to supplement their food stamps for food purchases. Use a graph to illustrate youranswer.

3. Explain the distinction between the hard-core poor and the marginal poor. Should public policies for these two groups be designed differently?Why?

4. Explain the concept of welfare dependency. Why can people become dependent on government program for theirsupport?

5. What are the major problems that you see in the design of the government's redistribution programs? What recommendations do you make to improve thesystem?

6. Describe "Pay-As-You-Go" financing mechanism of current Canadian Pension Plan (CPP). What are the issues (problems) of current form of socialsecurity?

7. What are the criteria for a good collective decision-making rule? Explain Arrow's ImpossibilityTheoreminlightoftheabovecriteriaofagoodcollectivedecision-makingrule.

8. Consider the fiscal federalism in Canada: A large share of public expenditure and revenue collection is carried out by the provincial and local governments. According to the Tiebout model, when individuals "vote with their feet" bymoving to the jurisdictions with others who share similar tests for public goods, the provision of local public goods will be efficient. ExplainhowtheTieboutmodelsolvestheproblemswithpreferencerevelationthatarepresent with Lindahlpricing.

9. Discuss the schisms that exist between the old and new public choiceschools.

10. Based on class discussion of the articles, defend or refute the Tories' proposal to give taxcuts to big corporations in the election on May 2,2011.

11. Discuss how the asymmetric information in the context of health care market leads to market failure. Give examples to support youranswer.

12. If cash transfers are at least as good as, and sometimes better than, in-kind transfers, can in- kind transfers be justified? Also, discuss the perverse incentive structure inherent in the government redistributiveprograms.

13. There is a growing concern with the incidence of poverty among unattached, non-elderly individuals. Feng, Dubey, and Brooks (2007) find that being a high school leaver is an important risk factor for being in low income for this group. Provincial welfare and workfare programs often require recipients to participate in some job/employment related activities. However, poor people who participate in job training programs may not always be successful in leaving poverty. Discuss the strengths and weaknesses of job training program to eliminate poverty.

14. The Canadian federal election 2015 was held on October 19, 2015. In the election, the Liberal Party, led by Justin Trudeau, ran the election campaign on the platform to increase investment on infrastructure by running federal budget deficit about $10 billion each year for the next four years. Subsequently, his party won 184 seats, allowing it to form a majority government with Justin Trudeau becoming the Prime Minister of Canada. Defend or refute the Liberal's plan to run federal budget deficit in the next fouryears.

15. Suppose a family with only one child earns $50,000 per year and lives in a community without publicly providededucation.
A. Draw the family's budget constraint showing the trade-off between the quantity of education for the child and all othergoods.

B. Suppose the option of free public education worth $8,000 per student is introduced. The family has the option of either spending its money on private education or participating in the free public system that provides $8,000 worth of education. Show how this changes the family's spending (consumption)possibilities.

C. Suppose that after the introduction of the free public education system the family reduces its consumption of education. Draw a set of indifference curves that is consistent with thisoutcome.