Chapter

Uncertainty, Redistribution, and the Labor Market

Casey B. Mulligan

in The Redistribution Recession

Published in print November 2012 | ISBN: 9780199942213
Published online January 2013 | e-ISBN: 9780199980772 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199942213.003.0010
Uncertainty, Redistribution, and the Labor Market

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This chapter presents a theory of how the financial panic and other events may have motivated an expansion of the safety net, despite its depressing effect on the labor market. The principal-agent theory of the “equity-efficiency tradeoff” is reviewed and connected with recent economic events. The chapter clarifies that a full cost-benefit analysis of the recession must account for the equity and safety benefits of safety net expansions, for the prevalence of 100 percent marginal tax rates, and for the existence of multiple tax collectors.

Keywords: equity-efficiency tradeoff; redistribution; labor market

Chapter.  3779 words.  Illustrated.

Subjects: Public Economics

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