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What is the difference between exogenous growth and endogenous growth? Why does the latter give a larger role for public policy?
Discuss the possible implications of making participation in social security voluntary. You can also use arguments of adverse selection and moral hazard.
What are the advantages and problems related to a reform of social security that consists of switching to individual annuitized accounts?
How can the theory explain that IRAs increase savings? What are the income effects and the substitution effects?
What is the present discounted value of her benefits when claiming at either age 60 or age 65? At what age should she claim her benefits?
Prove that there will be at least one equilibrium level of tax evasion. Show how multiple equilibria can occur. Which equilibria are stable?
What could be a credible audit strategy? What is the impact on the equilibrium audit strategy of an increase in the cost of auditing?
Tax evasion is sometimes described as ‘contagious,' meaning that an increase. In such circumstances, is the only equilibrium to have everyone evading?
It is found that the amount of income not declared is, on average, different among the countries. Discuss possible explanations for this finding.
In many voting situations the electors can gain by voting strategically. Why will a consumer never make a strategic choice of jurisdiction?
What is the willingness to pay of the rich residents for the local public good? What is the willingness to pay of the poor residents?
What will be the equilibrium distribution of residents? Are there still residents unhappy with the amount of local public good?
How much public good will be provided under majority voting in each district? Is there any resident who wants to move? Why or why not?
Economic exigency requires that consumers exploit all opportunities to increase their welfare. Does this argument legitimize tax evasion?
What if their inclusion implied that tax evasion should not be punished? Would you provide the same arguments for violent crimes?
What value of Y1 makes the consumer indifferent between these two jobs? How does a change in the tax rate affect this level of income?
In a state-contingent income space, each person's indifference curves are generally bowed in toward origin. Why does this imply that the person is risk averse?
Provide an expression for the optimal value of X. For F = ½ and p = ½ show that the declaration X is an increasing function of t.
Use the parameter values from the previous exercise with the modification that pay in the occupation permitting. How is this value affect by an increase in t?
What level of income would you announce? Once declarations are made, will the revenue service act according to its announced auditing plans?
What are the advantages and disadvantages of categorical grants relative to negative income tax?
Provide an argument to establish that the optimal allocation must be Pareto-ancient. What assumptions have you placed upon the social welfare function?
How is the deadweight loss affected by changes in a and b? How does a change in b affect the elasticity of demand at the equilibrium without taxation?
And a poverty line of z = 6, calculate the Sen poverty measure. Explain the values obtained for the two distributions.
Explain how Mr. A and Mrs. B must have very different views about income sharing within a family to end up with such different answers.