LT 3 - Taxes, Transfers and Labour Supply

Question 1

State:

1) The Standard Static Model (leisure-labor choice model)
2) Optimal labor supply

Answer 1

Question 2

Graphically show the income and substitution effects of labor supply

Answer 2

Question 3

State the equations and explain:

1) Uncompensated elasticity
2) Income elasticity
3) Compensated elasticity

Answer 3

Question 4

Explain the importance of convexity assumption in the standard model

Answer 4

Question 5

Under the convexity assumption, graphically show the effect of a marginal change in wage

Answer 5

Question 6

Explain the problem of non-convexity regarding changes in wages or taxes

Answer 6

Question 7

Graphically show the effect of change in marginal wage under non-convexity

Answer 7

Question 8

Graphically show a non-convex budget constraint and indifference curve of transfer program, with:

1) Transfer phase-out
2) Low-tax bracket
3) High-tax bracket

Answer 8

Question 9

State the standard regression equation to estimate labor supply

Answer 9

Question 10

Potential problems of standard regression analysis to estimate labour spply

Answer 10

Question 11

Experimental evidence to estimate labor supply:

1) Randomised experiments
2) Natural experiments

Answer 11

Question 12

Explain the experiment of EISSA (1995) on the Tax Reform Act of 1986

Answer 12

Question 13

Explain the findings and issues of EISSA (1995) experiment

Answer 13

Refer to graphs and stat

Question 14

Explain In-work benefit programs

List examples

Answer 14

Question 15

Graphically show the impact of EITC on labor supply

Answer 15

See problem set for more

Question 16

Explain the experiment of Eissa & Liebman (1996) to estimate the effect of EITC expansion on labor force participation and hours worked for single mothers

Answer 16

Question 17

Explain the findings and issues of Eissa & Liebman (1996)

Answer 17