In this chapter: Distinguish primary from secondary income distribution, understand the redistributive impact of the budget on secondary income distribution, explain the calculation of a Gini coefficient, identify the excess burden of a subsidy, show how a subsidy could be welfare-enhancing if there are positive externalities associated with consumption of certain goods (e.g. Food for the poor),...
• • • • • • • • • Distinguish primary from secondary income distribution Understand the redistributive impact of the budget on secondary income distribution Explain the calculation of a Gini coefficient Identify the excess burden of a subsidy Show how a subsidy could be welfare-enhancing if there are positive externalities associated with consumption of certain goods (e.g Food for the poor) Distinguish between the impact of a cash transfer and a subsidy in kind Show how social transfers may create a disincentive to work Identify major trends in fiscal incidence in South Africa, particularly with regard to social spending Understand the redistributive impact of some major social policy interventions in South Africa Country % Population Living Below International Poverty Line (< $1 per day) South Africa < 25% Botswana 23% Namibia 35% Malawi 42% The Gini coefficient • Measure of inequality • High coefficient indicates high inequality Primary income • Actual value of income received in cash or in kind Secondary income • Primary income less direct taxation, plus value of government services • • • Fiscal incidence Balanced budget incidence Government’s distributive role – – – – – – – Rule maker Controller of prices and wages Market operator Influence on long-term patterns of activities Taxer – supplier of public goods & welfare services Payer – of transfer incomes (Potential) redistributor of assets • • • School education Health Social security – Occupational insurance – Social assistance – Means test of social pensions • • Social welfare services Housing ... coefficient • Measure of inequality • High coefficient indicates high inequality Primary income • Actual value of income received in cash or in kind Secondary income • Primary income less direct taxation,... major social policy interventions in South Africa Country % Population Living Below International Poverty Line (< $1 per day) South Africa < 25% Botswana 23% Namibia 35% Malawi 42% The Gini coefficient... in kind Show how social transfers may create a disincentive to work Identify major trends in fiscal incidence in South Africa, particularly with regard to social spending Understand the redistributive