Essays on public economics

This doctoral thesis is a collection of four essays in public economics that look at various public policies and their impacts on low-income and otherwise vulnerable individuals. The essays share the general aim of studying the effectiveness of public policies in achieving their stated goals. The first essay is single-authored by the candidate, and the latter three are collaborations with one or more co-authors. In the first essay, I use a unique dataset compiled from Finnish registers and surveys to provide a comprehensive characterisation of the take-up behavior of Finnish welfare benefits (housing allowance and social assistance) using descriptive methods. I provide various stylised facts on take-up and discuss how income dynamics matter for understanding take-up and benefit targeting. The second essay focuses on the impact of information on benefit takeup. We study the information campaign in the context of the introduction of the guarantee pension program in Finland in 2011 and find that receiving a mailed information letter and application form significantly increased take-up compared to non-recipients. In the the third essay, we analyse the impact of employers’ disability insurance (DI) contributions on the incidence of disability pensions among their workers. Experience rating is used in DI in Finland in order to increase employers’ incentives to prevent disabilities among their workers. We use detailed data and an empirical strategy that allows us to identify the causal effect of experience rating on disability inflow. Our analysis finds that the policy is not effective in reducing disabilities. The fourth essay uses a theoretical framework to provide optimal tax and transfer rules for poverty reduction in developing countries. We modify the standard optimal tax framework by restricting tax instruments to be linear, which are more feasibly implemented in countries with a lower administrative capacity. We show that when we change from the standard objective of welfare maximisation to that of poverty minimisation, which better depicts the concrete objectives of such countries, the optimal tax and transfer rules are changed.