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In-class exercise

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 RGR_G, WW, and RR.

  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).

References
  1. Heckman, J. J., & Vytlacil, E. J. (2007). Chapter 70 Econometric Evaluation of Social Programs, Part I: Causal Models, Structural Models and Econometric Policy Evaluation. In Handbook of Econometrics (pp. 4779–4874). Elsevier. 10.1016/s1573-4412(07)06070-9
Applied Microeconomics
Preparation