In-class exercise

In-class exercise#

Note

Please respect the time limits. Of course you do not need to set a timer, but do try to make it to the very end.

The tasks refer to Heckman and Vytlacil (2007).

Be prepared to present/discuss each of the following questions in class. You should designate group members for each of the subtasks (e.g., task 1 / example 1, task 2 / question 1, etc.) such that everybody is prepared to take a lead on at least one of these subtasks.

Task 1: Policies and policy invariance (70min)#

  1. Explain in your own words what is meant by a policy regime.

  2. Why is policy invariance so important? Discuss.

  3. Explain PI-1 in your own words, ideally by means of an example.

  4. Explain PI-2 in your own words, ideally by means of an example.

  5. Find an own example where PI-3 and/or PI-4 are violated, but PI-1 and PI-2 hold. Explain.

Task 2: Criteria for assessing policies (45min)#

  1. Explain in your own words the difference between social welfare functions using \(R_G\), \(W\), and \(R\).

  2. Think very broadly of taxes and social policies. Try to describe broadly the social welfare functions implicit in the programmes of two stereotypical political parties (left-wing, libertarian, conservative, populist, … whatever you like).