1. “Public finance” course First term 2010/2011 Instructor Dr. Mo’een Rajab E.mail: moeenrajab@hotmail.commoeenrajab@hotmail.com Palestine University Finance and business college

2. Collective Benefits Resulting from Aid to the Poor: Social Stability and Safety Nets Changes in the distribution of income that reduce the incidence of poverty can result in benefits that are collectively enjoyed. From this perspective, income redistribution to the poor can be viewed as a public good.

3. Many persons who support government efforts to redistribute income do so because they believe that they, and other non poor citizens, will benefit when poverty is reduced. They might also believe that government programs that establish a safety net to prevent personal income from falling below

4. Income falling below certain levels: When we prevent personal income from falling under certain levels, then we provide them with insurance; that is, if individuals should suffer a financial or health-related catastrophe, government policies would prevent them from becoming destitute. In 1991 and 1992, a period of recession and slow growth in the United States, the number of people receiving such benefits increased substantially.

5. In addition, persons could have genuine compassion for those who are unfortunate enough to be unable to provide for their own needs and indeed experience satisfaction when the government provides subsidies to the poor. Income redistribution also can provide collective benefits through social stability.

6. Many persons reason that a society in which poverty is prevalent breeds discontent and revolution, with the potential for chaos and violence. Upper-income groups tend to support income transfers to the poor to secure the benefits of social stability, thereby reducing the probability of revolutionary upheaval.

7. But why do. we rely an government rather than an private charity to provide assistance to the poor? The answer lies in the public-gaad nature of charity. Voluntary donations to the poor are likely to result in an undersupply of income redistribution to law-income groups relative to the efficient amount because of the free-rider problem

8. Government action to redistribute income can establish uniform standards of eligibility for aid. Such standards might not be ideal from the point of view of all citizens, but these government standards reflect the political compromise necessary to abstain a public program of ensured tax-financed income redistribution.

9. Government Programs of Assistance to the Poor in the United States Eligibility One of the crucial concerns in the development of programs to aid the poor in the United States has been the effect of transfers and the work incentive of the recipients. As a result, the major welfare programs far the poor in the United States mainly assist those who., far and reason of anther, cannot work.

10. These groups include the disabled, the aged, and families of needy children headed mainly by women. Those falling into these demographic categories satisfy the status test far public assistance.

11. The status test ensures that they belong to and of the particular groups that is eligible for poverty relief. Because persons in these groups are not usually in the labor farce, transfers to them are believed to have minimal effects an work incentive. In effect, this policy "tags" certain groups of limited work capacity and makes them eligible for government assistance.

12. What status test provides? The status test provides only crude indication of the extent to which candidates for public assistance are capable of working. Use of health, age, 0.1' other arbitrary criteria to determine whether a person is able to work provides only an imperfect indication of the actual capacity to work. For example, tagging poor children who are not expected to work as eligible for government assistance means that their parents also, will receive assistance.

13. Effects of preventing adverse work incentive: To prevent adverse work incentive effects an parents in poor families with dependent children, mast state welfare programs provide aid only to families with a single parent- primarily female-headed families.

14. The increasing of women Labor force participation: However, with increased labor force participation of women in the United States in recent years, the nation that single mothers are not expected to work has came under scrutiny. Concern has increased out the effect of government assistance programs assisting children and the incentives of single parents to seek work.

15. Under the reframed system of income support for the poor in the United States, the status test far eligibility has been revised. Depending an individual state policy, mast recipients of welfare are required to work of seek work training and are eligible for income support only for a limited time.

16. Thereafter, their status will be irrelevant because they will no longer be eligible for assistance. Except for a limited number of poor who are disabled, the new program will therefore greatly increase the incisive to work for all persons with low incomes.

17. The conditions of eligibility for cash and other forms of assistance: To be eligible for cash and other forms of assistance in the United States, recipients also must pass a means test, which establishes that those passing the status test have incomes and asset levels that are below the minimally required amounts to be eligible for aid.

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