eco 2114 notes

Here are my musings for chapter 3.This chapter consists of applications – some of which are complex – of the labour supply model to social insurance programs. The central theme of this chapter is the central trade-off that any social insurance program faces between the goal of alleviating economic hardship for those who suffer income losses on one hand and the goal of maintaining reasonably strong incentives to work. In a nutshell, these very important programs – which are considered to be indispensable in the civilized society with a modern, rich economy – should be designed to be neutral. This means that we do not want these social insurance programs to influence the income-leisure choices of the beneficiaries. As far as the disincentives are concerned, the one that is probably the most serious is developing a long-term dependency on a program. Developing a short-term dependency is fine, as these programs are designed to assist those who are temporarily down and out (one well-worn cliché is that social insurance programs should provide 'a safety net, not a hammock', or a 'hand-up, not a handout'.) As a taxpayer and an informed citizen – not to mention a student in thiscourse - you should be able to name the primary social insurance programs that exist in Canada and to briefly describe how they function. All of that information is in the text. I mentioned a number of types of social insurance programs.In particular,there is the dichotomy between means-tested, universal programs such as social assistance on one hand, and insurable-risk programs, such as 'Employment Insurance' and workers’ compensation on the other hand.Some observers refer to this as the
‘handout vs. contract’ distinction. For the latter, in order to claim benefits, one has to have demonstrated that a loss of income occurred due to an insurable risk that is specified in the social insurance contract (such as a layoff), and one must have contributed