ANSWER ALL QUESTIONS
1. On Living Standars, Welfare Programmes and Tax Credits.
a. Most developed countries offer some type of welfare programme to
guarantee a decent level of standard of living to their members.
Illustrate the potential disincentive effect on labour supply of such
b. At the same time many countries have introduced tax credits with
the aim to supplement the earnings of poor workers and to
encourage labor supply among the poor. However, in order to
avoid paying the credit to middle income workers, this supplement
is gradually phased out as earnings rise. Show how the introduction
of this programme affects the labour supply.
c. Is the empirical evidence on the impact of tax credits on labour
supply consistent with economic theory? Explain and provide at
least two pieces of evidence.
[ 20 ]
2. On female labour supply.
a. Use the neoclassical theoretical framework to explain the increase
in female labour supply over the past few decades.
b. On Daron Acemoglu and David H. Autor’s paper “Women, war
and wages: The effect of female labor supply on the wage structure
at Mid-century” elaborate: What did the authors want to estimate
and how does their question link to economic theory? What was
the econometric approach they adopted and why? Do their findings
agree with economic theory?
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