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Title: Public Insurance in Fiscal Federations: Evidence from the USA

Citation Type: Miscellaneous

Publication Year: 2018

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Abstract: In the division of fiscal responsibilities between central and local governments, it is usually argued that income insurance and inequality should be dealt with by the central government. This paper explores the extent to which the US federal tax and transfer system is able to provide uniform social insurance to a prototype family in different states, given variations in state tax and transfer policies. We simulate the combined response of federal and state taxes and transfers to a negative pre-tax income shock, and compare the results for different states. We find large differences in the level of insurance experienced by households in different states, particularly for low income households, and that these differences are mostly driven by state policies. We would like to thank´Arpád´Abrahámthank´ thank´Arpádthank´Arpád´ thank´Arpád´Abrahám, Jérôme Adda, Manuel Arellano, Juan Dolado, AxelleFerrì ere, Ramon Mari-mon, Gaston Navarro and Dominik Sachs for useful comments and suggestions. We would also like to thank participants of the June 2017 ADEMU Summer School in Toulouse, the April 2018 workshop on Risk Sharing and Macroeconomic Interdependencies hosted by CERGE-EI and the May 2018 ADEMU Final conference hosted by the EUI, the 2018 ZEW Local Finance conference, as well as members of the EUI Macro Working Group for comments on an earlier version of this project. We are very grateful to Hilary Hoynes and Erzo Luttmer for generously sharing their calculators for Medicaid and AFDC/TANF benefits.

Url: http://ademu-project.eu/wp-content/uploads/2018/07/WP2018_138.pdf

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Authors: Fleck, Johannes; Simpson-Bell, Chima

Publisher: European University Institute

Data Collections: IPUMS USA

Topics: Other

Countries: United States