Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.
-
date post
20-Dec-2015 -
Category
Documents
-
view
234 -
download
2
Transcript of Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.
![Page 1: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/1.jpg)
Figures and Tables
![Page 2: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/2.jpg)
Chapter 2Equilibrium and Efficiency
Figures and Tables
![Page 3: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/3.jpg)
An Edgeworth Box
1
2
22
12
21
11
11x
12x 2
2x
21x
x
![Page 4: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/4.jpg)
Preferences and Demand
1
2
1x2x
![Page 5: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/5.jpg)
Relative Price Change
1
2
1x2x
![Page 6: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/6.jpg)
Equilibrium
1
2
1x
2x
![Page 7: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/7.jpg)
Equilibrium and Excess Demand
22 ,1 pZ
2p
![Page 8: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/8.jpg)
A Typical Production Set
Good 1
Good 2
- 2
3Yj
![Page 9: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/9.jpg)
Profit Maximization
Good 1
Good 2
1p
2p
0
*y
![Page 10: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/10.jpg)
Utility Maximization
Good 1
Good 2
1p
1
*~x
![Page 11: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/11.jpg)
Efficient Equilibrium
Good 1
Good 2
1p
1
**~ yx
![Page 12: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/12.jpg)
Constant Returns to Scale
Good 1
Good 2
1p
1
**~ yx
0
![Page 13: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/13.jpg)
Pareto Efficiency
1
2
a
b
c
d
![Page 14: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/14.jpg)
The First Theorem
1
2
e
Contract Curve
![Page 15: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/15.jpg)
The Second Theorem
1
2
'
'e
![Page 16: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/16.jpg)
Proof of the Second Theorem
x
Z
PriceLine
FeasibleSet
1x
2x
W
![Page 17: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/17.jpg)
A Lump-Sum Transfer
1
2
e
'
11
~x
![Page 18: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/18.jpg)
Chapter 3Public Sector Statistics
Figures
![Page 19: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/19.jpg)
Total Expenditure 1870 – 1996 (% of GDP)
0
10
20
30
40
50
60
1870 1890 1910 1930 1950 1970 1990
US
UK
Germany
France
Japan
![Page 20: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/20.jpg)
Total Expenditure 1970 - 2002 (% of GDP)
15
20
25
30
35
40
45
50
55
60
1970 1980 1990 2000
France
Germany
United Kingdom
United States
Japan
Australia
![Page 21: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/21.jpg)
Individual Expenditure Items (% of GDP)
0
2
4
6
8
10
12
14
1910 1930 1950 1970 1990
Japan
UK
US
Germany
France
0
1
2
3
4
5
6
7
8
1900 1920 1940 1960 1980 2000
Japan
UK
US
Germany
France
0
1
2
3
4
5
6
7
1870 1890 1910 1930 1950 1970 1990
Japan
UK
Germany
France
0
1
2
3
4
5
6
7
8
9
10
1890 1910 1930 1950 1970 1990
Japan
UK
US
Germany
France
a. Defence b. Education
c. Health d. Pensions
![Page 22: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/22.jpg)
Government Expenditure 1998 (% of GDP)
0 10 20 30 40 50 60
United States
UK
Sweden
Poland
New Zealand
Netherlands
Korea
Japan
Italy
Hungary
Germany
France
Canada
Belgium
![Page 23: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/23.jpg)
Share of Expenditure by Levels of Government
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
US 1996 UK 1998 Germany 1996
Local
State
Central
![Page 24: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/24.jpg)
Composition of Consolidated General Spending
c. UK 1998
a. US 1996 b. Germany 1996
![Page 25: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/25.jpg)
a. US 1996 b. Germany 1996
c. UK 1998
Composition of Central Spending
![Page 26: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/26.jpg)
Composition of State Spending
a. US 1996 b. Germany 1996
![Page 27: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/27.jpg)
Composition of Local Spending
a. US 1996 b. Germany 1996
c. UK 1998
![Page 28: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/28.jpg)
Tax Revenues 1965 - 2000 (% of GDP)
10
15
20
25
30
35
40
45
50
1965 1975 1985 1995
Canada
United States
Australia
Japan
France
Turkey
United Kingdom
![Page 29: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/29.jpg)
Tax Revenue for Category of Taxation, 2000
0%10%20%30%40%50%60%70%80%90%
100%
Canad
a
United S
tates
Australi
aJa
pan
France
German
y
Turke
y
United K
ingdo
m
Other
Goods and Services
Property
Payroll
Social Security
Income and Profits
![Page 30: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/30.jpg)
Tax Revenue by Level of Government, Federal Countries,
2000
0%
10%20%
30%
40%50%
60%
70%
80%90%
100%
Australia Belgium Canada Germany UnitedStates
Social Security
Local
State
Federal or Central
Supranational
![Page 31: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/31.jpg)
Tax Revenue by Level of Government, Unitary Countries,
2000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
France Italy Japan Spain Turkey
Social Security
Local
Federal or Central
Supranational
![Page 32: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/32.jpg)
Tax Shares at each Level of Government, United States, 2000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Central State Local
Taxes on Use
Other Taxes
Specific Goods andServices
General Taxes
Property
Income and Profits
![Page 33: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/33.jpg)
Tax Shares at each Level of Government, Germany, 2000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Central State Local
Taxes on Use
Other Taxes
Specific Goods andServices
General Taxation
Property
Income and Profits
![Page 34: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/34.jpg)
Tax Shares at each Level of Government, Japan, 2000
0%
20%
40%
60%
80%
100%
Central Local
Taxes on Use
Other Taxes
Specific Goods andServices
General Taxes
Property
Income and Profits
![Page 35: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/35.jpg)
Tax Shares at each Level of Government, United Kingdom,
2000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Central Local
Taxes on Use
Other Taxes
Specific Goods andServices
General Taxes
Property
Income and Profits
![Page 36: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/36.jpg)
Chapter 4Theories of the Public Sector
Figures
![Page 37: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/37.jpg)
Excessive Government
Output
Marginal Budgetand Marginal Cost
yB' yC '
*y by
a b
![Page 38: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/38.jpg)
Government Agency
Public Good
Benefitand Cost
GhG
ccG hh
Gb
Gch
Gc
![Page 39: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/39.jpg)
Chapter 5Public Goods
Figures and Tables
![Page 40: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/40.jpg)
Typology of Goods
RivalrousNon-Rivalrous
Excludable
Non-Excludable
PrivateGood
CommonPropertyResource
ClubGood
PublicGood
![Page 41: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/41.jpg)
Preferences and Choice
1g
2g
2g
BudgetConstraint
1g
![Page 42: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/42.jpg)
Best Reaction for 2
1g
2gBudgetConstraint
1g
2g
![Page 43: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/43.jpg)
Nash Equilibrium
1g
2g
2g
1g
![Page 44: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/44.jpg)
Inefficiency of Equilibrium
Locus of ParetoEfficient Allocations
Set of Pareto-Improvements
1g
2g
2g
1g
![Page 45: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/45.jpg)
Allocation through VotingPrivategood
Publicgood
Publicgood
Utility
1G HGmG
![Page 46: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/46.jpg)
Price and Quantities
Private good Public good
Price Same Different
Quantity Different Same
![Page 47: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/47.jpg)
The Lindahl Equilibrium
1 2
2G1G
*G*G
Reactionof 1
Reactionof 2
![Page 48: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/48.jpg)
Gaining by False Announcement
1 2
2G1G
Le
Me
![Page 49: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/49.jpg)
Announcements and Payoffs
Player 1
Player 2
0
0
1
1
00
0
0
1
1
21 2
1
![Page 50: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/50.jpg)
Payoffs and Overstatement
Announcementof Player 1
Announcementof Player 2
0
0
1
1
00
41
21
21
21
41
41
![Page 51: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/51.jpg)
Clarke-Groves Mechanism
Player 1
Player 2
-1
-1
+1
+1
00
11 v
11 v11 v
12 v
12 v 12 v
![Page 52: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/52.jpg)
Payoffs for Player 1
Player 1
Player 2
-1
-1
+1
+1
0
2
Player 1
Player 2
-1
-1
+1
+1
0 20
0
11 v 11 v
0 2
![Page 53: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/53.jpg)
Effect of Income Transfer
1g
2g
1g1g
2g
2g
![Page 54: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/54.jpg)
New Equilibrium
1g
2g
1g1g
2g
2g
![Page 55: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/55.jpg)
Additional Consumers
G
g
2H3H
Pareto-Efficient
ReactionFunction
![Page 56: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/56.jpg)
Public Good Experiment
Social Benefit
Private Benefit
Public GoodPrivate Good
5
5
1
10
![Page 57: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/57.jpg)
A Contribution Campaign
Time
TotalContributions
...
Tx
2Tx
4Tx3Ty
1Ty
C
T
![Page 58: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/58.jpg)
Chapter 6Club Goods and Local Public
GoodsFigures
![Page 59: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/59.jpg)
Utility and Club Size
N2
N
nU
0 n*
Utility
![Page 60: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/60.jpg)
Optimum with Unequally-Sized Clubs
W
n
![Page 61: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/61.jpg)
Optimum with Equally-Sized Clubs
n
W
![Page 62: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/62.jpg)
Non-Unique Club Size
n2 3
U
![Page 63: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/63.jpg)
Achieving Efficiency
3U2U1U
'n ''n n
U
![Page 64: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/64.jpg)
Stability of the Symmetric Equilibrium
1U 2U
2h1h2
H
1hU 2hU
ab
c
d
e
![Page 65: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/65.jpg)
Inefficient Stable Equilibria1U 2U
2h1h2
H
1hU 2hU
a
b
c
![Page 66: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/66.jpg)
Chapter 7Externalities
Figures
![Page 67: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/67.jpg)
Deviation of Private from Social Benefits
PMB
MC
hz
MarginalBenefitand Cost )0'( ~
hvSMB
)0'( ~ h
vSMB
![Page 68: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/68.jpg)
Equilibrium with River Pollution
w
Lu, Ld0u 0d
u
d
w
Upstream
Downstream
Revenue
Revenue
Cost
Cost
![Page 69: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/69.jpg)
Choice of Commuting ModeMinutes Commuting
Train
MaximumTime Saving
0
Car
20 40
20
40
% of Car Users
![Page 70: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/70.jpg)
Job ChoiceIncome ofLawyers
Economist
0
Lawyer
100
% of Economists
Income ofEconomists
E
![Page 71: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/71.jpg)
The Rat Race
Player 2
Player 1
low
low
high
1/2
1/2
0
1 - c
1/2 - c
0
high
1 - c
1/2 - c
![Page 72: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/72.jpg)
Tragedy of the Commons
wc tax
Total Costper Boat
Revenueper Boat
Numberof Boats
*BoB
ARMR
![Page 73: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/73.jpg)
Equilibrium Keyboard Choice
0
1
1p*
p*
% of Qwerty users at time t
% of
Qwerty
users at
time t
![Page 74: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/74.jpg)
Pigouvian Taxation
Quantity
Value
PMB
SMB
PMC
ox mx
t
'PMC
![Page 75: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/75.jpg)
Uncertain Costs
Quantity
Value
SMB
PMCE
PMCH
PMCL
*z LzHz
*t
![Page 76: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/76.jpg)
Non-Convexity
Externality Externality
Output Output
![Page 77: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/77.jpg)
Chapter 8Imperfect Competition
Figures and Tables
![Page 78: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/78.jpg)
Market concentration in US Manufacturing, 1987Source: Concentration ratios in manufacturing,
1992, U.S. Bureau of the Census)Industry Number of
firms4-firm concentration ratio Herfindahl
index
Cereal breakfast foods
33 0.87 0.221
Pet food 130 0.61 0.151
Book publishing 2182 0.24 0.026
Soap and detergents
683 0.65 0.170
Petroleum refining 200 0.32 0.044
Electronic computers
914 0.43 0.069
Refrigerators / freezers
40 0.85 0.226
Laundry machines 11 0.93 0.286
Greeting cards 147 0.85 0.283
![Page 79: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/79.jpg)
Monopoly Pricing
Quantity
Price
c
*p
Prob.(Trade)
Price
*p
Monopoly withUniform Pricing
Monopoly withIncomplete Information
“Expected” Demand
pF1
MarginalRevenue
“Inverse”Demand
cMarginalRevenue
![Page 80: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/80.jpg)
Deadweight Loss with MonopolyPrice
Quantity
ARMR
pm
ym yc
B
A
E Dc
![Page 81: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/81.jpg)
Monopoly Welfare Loss
Author Sector Welfare loss (%)
Harberger US Manufacturing 0.08
Gisser US Manufacturing 0.11 – 1.82
Peterson and Connor US Food Manufacturing 0.16 – 5.15
Masson and Shaanan 37 US Industries 3
16
McCorriston UK Agricultural Inputs 1.6 – 2.5
20 – 40
Cowling and Mueller US 4 – 13
UK 3.9 – 7.2
![Page 82: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/82.jpg)
Tax Incidence with Perfectly Elastic Supply
Price
Quantity
p = c
q = c + t
t
![Page 83: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/83.jpg)
Tax Incidence in the General Case
Price
Quantity
p
q t
![Page 84: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/84.jpg)
Tax Under-Shifting
Price
Quantity
c
c + t
t
pq
oyty
a
b
ARMR
![Page 85: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/85.jpg)
Tax Over-ShiftingPrice
Quantity
c
t
p
q
c + t
ty oy
a
b
MR
AR
![Page 86: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/86.jpg)
Calculations of Tax Shifting
Baker and Brechling
UK Beer
0.696
UK Tobacco 0.568
Delipalla and O’Connell, Tobacco
“Northern” EU 0.92
“Southern” EU 2.16
Tasarika, Beer UK
0.665
![Page 87: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/87.jpg)
Possibility of a Profit Increase
1y
2y
2m
1m
c
b
21 yr
12 yr
![Page 88: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/88.jpg)
Contrasting Taxes
Quantity
Price
c
tc
ARMR
pq
Quantity
Price
c
AR
pq
1
AR
1
MR
Specific Tax Ad Valorem Tax
![Page 89: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/89.jpg)
Natural Monopoly
1AR21, ARMR2MR
p
1y2y
Price
Quantity
AC
MC
![Page 90: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/90.jpg)
Estimating the Effect of Merger in the Bath Tissue Market
Source: Data from Tables 1 and 2 in Hausman and Leonard (1997)
Bath Tissue Brand Market share (%)
Own-price elasticity
Price change [cost change] (%)
Kleenex 7.5 -3.38 +1.0 [-2.4]
Cottonelle 6.7 -4.52 -0.3 [-2.4]
Scot Tissue 16.7 -2.94 -2.6 [-4.0]
Charmin 30.9 -2.75
Northern 12.4 -4.21
Angel Soft 8.8 -4.08
Private Label 7.6 -2.02
Other 9.4 -1.98
Market demand -1.17
![Page 91: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/91.jpg)
Monopsony in the Labor MarketWage
Quantity of Labor
Labor Supplyw(L)
MarginalCost
Labor Demand MRL
cLmL
mw
cw
![Page 92: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/92.jpg)
Chapter 9Asymmetric Information
Figures and Tables
![Page 93: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/93.jpg)
Equilibrium in the Insurance Market
10
ExpectedRisk
:E
2
1
o45
![Page 94: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/94.jpg)
Multiple Equilibria
45o
10
ExpectedRisk
1E
2E
3E
![Page 95: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/95.jpg)
Perfect Information Equilibrium
0
d
hp
p
V
hV
*hS
*S
![Page 96: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/96.jpg)
Separating Contracts
0
d
hp
p
V
hV
hS
S
![Page 97: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/97.jpg)
Separating and Pooling Contracts
0
d
hp
p
V
hV
hS
S
oS
![Page 98: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/98.jpg)
Non-Existence of Pooling Equilibrium
0
d
V
hV
S
![Page 99: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/99.jpg)
Market Intervention
0
d
V
tVh
S
0hV
hh tp
tp
![Page 100: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/100.jpg)
The Single-Crossing Property
V
hV
Education
Wage
UtilityIncrease
![Page 101: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/101.jpg)
Separating EquilibriumV
hV
e
h
E
*e he *
Maximal educationlow type is willingto acquire to get hw
ew*
w
![Page 102: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/102.jpg)
Unreasonable BeliefsV
hV
e
h
E
*e
Maximal educationlow type is willingto acquire to get hw
Unreasonablebeliefs
ew*
w
![Page 103: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/103.jpg)
First-Best Contract
ep
** ,
I
d
UtilityIncrease
![Page 104: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/104.jpg)
Switching Line
d
Effort
No Effort
,V
SwitchingLine
*
![Page 105: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/105.jpg)
Second-Best Contract
d
Effort
No Effort
SwitchingLine 0E
1E
![Page 106: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/106.jpg)
Categorization of Outcomes
Cost of effort c2 c1
1st best Effort, full coverage
No effort, full coverage
2nd best Effort, partial coverage
No effort, full coverage
![Page 107: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/107.jpg)
Chapter 10Political Economy
Figures and Tables
![Page 108: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/108.jpg)
Stability
Alil Alice Bob Beth Carl Carol
Beth Alil Beth Carl Alice Bob
Alice Carl Alice Alil Beth Carl
Carol Bob Carol Bob Carol Alil
![Page 109: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/109.jpg)
Condorcet Paradox
Voter 1 Voter 2 Voter 3
a c b
b a c
c b a
![Page 110: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/110.jpg)
Location of Households
1 2 3 4 ................. n – 3 n – 2 n – 1 n
![Page 111: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/111.jpg)
Single-Peaked Preferences
a. Not single-peaked b. Single-peaked
U
1U
2U
U
1U
2U
3U
G G
![Page 112: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/112.jpg)
Single-Crossing without Single-Peakedness
Policy spectrum
Utility level1U
2U
3U
![Page 113: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/113.jpg)
Single-Peakedness in Multi-Dimensions
Location
Time1
2
32x
1x
3x
![Page 114: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/114.jpg)
Rankings
Voter 1 Voter 2 Voter 3
x1 x2 x3
x2 x3 x1
x3 x1 x2
![Page 115: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/115.jpg)
Binary Agenda
[b]
[b][c]
ba
bcca
![Page 116: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/116.jpg)
Borda Voting
(3) (2) (2)
a c b
b a c
c b a
![Page 117: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/117.jpg)
Top Cycle
Voter 1 Voter 2 Voter 3
a c b
b d c
c a d
d b a
![Page 118: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/118.jpg)
Independence of Irrelevant Alternatives
(3) (2) (2)
d c b
a d c
b a d
c b a
![Page 119: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/119.jpg)
Plurality Voting
(2) (3) (4)
a b c
b a a
c c b
![Page 120: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/120.jpg)
Approval Voting
(3) (1) (1)
a b c
b a b
c c a
![Page 121: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/121.jpg)
Runoff Voting
(6) (5) (4) (2)
a c b b
b a c a
c b a c
![Page 122: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/122.jpg)
Probabilities of Election Outcomes
01 X
11 X
12 X 22 X02 X
8
1
8
1
8
1
8
1
8
2
8
2
![Page 123: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/123.jpg)
Participation and the Probability of being Pivotal
N
P
2.0p5.0p9.0p
![Page 124: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/124.jpg)
Closeness and the Probability of being Pivotal
P
N
N
75.0
25.0
2
1
5.0
5.0
2
1
![Page 125: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/125.jpg)
Testing the Paradox of Voting (*) all coefficients are significantly different
from zero at the 1-per cent level.(Source: Shachar and Nalebuff, 1999, Table 6)
Variable Coefficient (*) Standard Error
Constant 0.4033 0.0256
Closeness 0.1656 0.0527
Voting population -0.0161 0.0036
Blacks (%) -0.4829 0.0357
Rain on election day -0.0349 0.0129
New residents (%) -0.0127 0.0027
![Page 126: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/126.jpg)
The Apportionment of Seats
Party Vote share Exact apportionment
Hamilton apportionment
Left 0.45 11.25 11
Right 0.41 10.25 10
Center 0.14 3.5 4
Total 1 25 25
![Page 127: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/127.jpg)
The Paradox
Party Vote share
Exact apportionment
Hamilton apportionment
Left 0.45 11.7 12 (+1 seat)
Right 0.41 10.66 11 (+1 seat)
Center 0.14 3.64 3 (-1 seat)
Total 1 26 26
![Page 128: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/128.jpg)
Chapter 11Rent-Seeking
Figures
![Page 129: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/129.jpg)
Monopoly Deadweight Loss
Price
Quantity
c
ARMR
d
mp
my cy
![Page 130: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/130.jpg)
Competitive and Monopoly Equilibria
Good 1
Good 2
a
b
cp
mp
ppf
![Page 131: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/131.jpg)
Monopoly and Lobbying
Good 1
Good 2
a
b
cp
mp
c
Lppf
ppf
![Page 132: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/132.jpg)
The Threat of Lobbying
b. Lobbying WorseGood 1
Good 2
a
b
cp
mp
d
Good 1
Good 2
a
b
cp
mp
d
a. Monopoly Worse
![Page 133: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/133.jpg)
Chapter 12Optimality and Comparability
Figures and Tables
![Page 134: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/134.jpg)
The Utility Possibility Frontier
a
bc
2U
1U1
2
a
b
c
![Page 135: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/135.jpg)
Social Optimality
o
1U
2U
![Page 136: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/136.jpg)
Optimal Lump-Sum Taxes and Incentive Compatibility
1e
2e
*e
Good 1
Good 2
p
![Page 137: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/137.jpg)
Efficiency and Inequity
1
2
![Page 138: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/138.jpg)
Incompleteness of Pareto Ranking
1
2
1s2s
3s
![Page 139: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/139.jpg)
Allocations and Utility
x1 y1 U1 x2 x2 U2
A 4 9 6 3 2 5
B 16 1 4 2 5 7
![Page 140: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/140.jpg)
Non-Comparability and Level Comparability
Non-Comparability A B
18 12
10 14
10 12
Level Comparability A B
36 16
25 49
25 16
1111 3~ UUfU
2111 )(~ UUfU
2222 )(~ UUfU
2222 2~ UUfU
hUW ~min
hUW ~min
![Page 141: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/141.jpg)
Cardinal Utility
Non-Comparability A B
14 10
35 47
63 67
Level Comparability A B
20 14
20 26
60 54
1111 22~ UUfU
2111 )(~ UUfU
2222 )(~ UUfU
2222 65~ UUfU
21 ~~2 UUW
21 ~~2 UUW
![Page 142: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/142.jpg)
Full Comparability
Non-Comparability A B
25 19
16 22
18.25 19.75
Level Comparability A B
19 13
16 22
16.75 15.25
1111 37~ UUfU
111 31~ UUfU
222 31~ UUfU
2222 31~ UUfU
UUUW h ~min21
UUUW h ~min21
![Page 143: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/143.jpg)
Chapter 13Inequality and Poverty
Figures and Tables
![Page 144: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/144.jpg)
Minimum Needs Equivalence ScalesSources: B.S. Rowntree (1901) Poverty: A Study of Town Life,
(Macmillan) W. H. Beveridge (1942) Social Insurance and Allied Services, (HMSO) US Bureau of the Census (2003) www.
census.gov/hhes/poverty/threshld/thresh03.html
Rowntree (1901)
Beveridge (1942)
US Poverty Scale (2003)
Single person 60 59 78
Couple 100 100 100
+1 child 124 122 120
+2 children 161 166 178
+3 children 186 166 178
+4 children 223 188 199
![Page 145: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/145.jpg)
Construction of Engel Scale
Income
Expenditure share of food
1d
2d
2M1M
s
![Page 146: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/146.jpg)
Adult Good Equivalence Scale
Income
Demand foradult good
1d
2d
2M1M
x
![Page 147: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/147.jpg)
General Equivalence Scale
Good 1
Good 2
1|*d
U2|*
dU
Budget Linewith Income 2M
Budget Linewith Income 1M
![Page 148: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/148.jpg)
Construction of a Lorenz Curve
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
![Page 149: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/149.jpg)
Lorenz Curves as an Incomplete Ranking
A
B
A more equal than B
A
B
A and B incomparable
![Page 150: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/150.jpg)
Relating Gini to Lorenz
Lorenz Curve
![Page 151: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/151.jpg)
The Gini Social Welfare Function
1M
2M
![Page 152: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/152.jpg)
The Equally Distributed Equivalent Income
1M
2M
EDEM
EDEM
Income ofHousehold 1
Income ofHousehold 2
Social IndifferenceCurve
![Page 153: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/153.jpg)
Inequality Before and After Taxes and Transfers
Source: OECD ECO/WKP(98) Notes: 1. The Squared Coefficient of Variation (SCV) is defined by SCV =
[H-1]C. 2. For the Atkinson measure, = 0.5.
Measure SCV GIni Atkinson
Before After Before After Before After
Denmark 1994 .671 .229 .420 .217 .209 .041
% change 1983-1994 4.9 2.0 11.2 -4.9 25.3 -11.1
Italy 1993 1.19 .584 .570 .345 .299 .105
% change 1984-1993 59.6 44.7 20.8 12.8 43.8 33.1
Japan 1994 .536 .296 .340 .265 .124 .059
% change 1984-1994 33.7 21.7 14.0 4.9 47.3 10.9
Sweden .894 .217 .487 .230 .262 .049
% change 1975-1995 49.1 36.9 17.2 -1.0 28.7 3.2
United States .811 .441 .455 .344 .205 .100
% change 1974-1995 32.0 25.4 13.1 10.0 19.6 18.6
![Page 154: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/154.jpg)
Poverty using the FGT P2 MeasureSource: Foster, Greer and Thorbecke (1985)Years in Nairobi Level of poverty % Contribution to total poverty
0 .4267 5.6
.01 – 1 .1237 6.5
2 .1264 6.6
3 – 5 .0257 5.1
6 – 10 .0343 12.1
11 – 15 .0291 9.4
16 – 20 .0260 6.6
21 – 70 .0555 23.8
Permanent resident .1659 8.7
Don’t know .2461 15.5
Total .0558 99.9
![Page 155: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/155.jpg)
Evolution of Poverty (% Change in Poverty Measure)
Source: OECD ECO/WKP(98)2
Poverty line (% of median income)
40% 50% 50% 50% 60%
MeasureHead-count
Head-count
Income gap
Sen index
Head-count
Australia 1984 - 1993/4 0.0 -2.7 5.0 -4.2 -1.4
Belgium 1983 - 1995 -1.4 -2.8 1.1 -27.1 -2.3
Germany 1984 – 1994 1.8 2.9 2.5 20.8 3.8
Japan 1984 – 1994 0.6 0.8 2.5 23.1 0.4
Sweden 1983 - 1995 0.9 0.4 7.9 23.7 0.4
United States 1985 - 1995 -1.2 -1.2 0.2 -4.9 -0.1
![Page 156: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/156.jpg)
Chapter 14Commodity Taxation
Figures and Tables
![Page 157: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/157.jpg)
Deadweight Loss
Quantity
Price
p
tpq
0X1X
DWL
a
bc d
ef
![Page 158: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/158.jpg)
Income and Substitution Effects
Good 1
Good 2
a
b
c
d
0U
1U
2U
![Page 159: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/159.jpg)
Absence of Deadweight Loss
Good 1
Good 2
a
b0U
1U
![Page 160: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/160.jpg)
Revenue and Production Possibilities
Good 1 (Labor)
Good 2 (Consumption)
R
Y
1
p
![Page 161: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/161.jpg)
Consumer Choice
Good 1 (Labor)
Good 2 (Consumption)
1
p
q
Offer Curve
![Page 162: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/162.jpg)
Optimal Commodity Taxation
Good 1 (Labor)
Good 2 (Consumption)
Y
1
p0I
eq
*t
*e
1I
- R
![Page 163: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/163.jpg)
Production Efficiency
Good 1 (Labor)
Good 2 (Consumption)
f
1
p0I
eq
- R
![Page 164: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/164.jpg)
Tax ReformSource: Madden (1995)
Good = 2 = 5
Other goods 2.316 4.349
Services 2.258 5.064
Petrol 1.785 3.763
Food 1.633 3.291
Alcohol 1.566 3.153
Transport and equipment 1.509 3.291
Fuel and power 1.379 2.221
Clothing and footwear 1.341 2.837
Durables 1.234 2.514
Tobacco 0.420 0.683
![Page 165: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/165.jpg)
Tax ReformSource: Madden (1995)
Item = 2 = 5
Cereals -0.015 -0.089
Milk and milk products -0.042 -0.011
Edible oils 0.359 0.342
Meat, fish and eggs 0.071 0.083
Sugar and tea 0.013 0.003
Other food 0.226 0.231
Clothing 0.038 0.014
Fuel and light 0.038 0.014
Other non-food 0.083 0.014
![Page 166: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/166.jpg)
Redistribution of Indian commodity taxes
Source: Ray (1986b)
Rural Urban
Expenditure level
Rs. 20 0.105 0.220
Rs. 50 0.004 0.037
h
hT
h
hT
![Page 167: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/167.jpg)
Optimal RedistributionSource: Ray (1986b)
= 0.1 = 1.5 = 5
0.07 0.343 0.447T
![Page 168: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/168.jpg)
Chapter 15Income Taxation
Figures and Tables
![Page 169: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/169.jpg)
Labor Supply Decision
Consumption Consumption
Leisure Pre-Tax Income
a. Leisure b. Pre-Tax Income
wTt1
*x
*T T *z
ztpx 1
*x
![Page 170: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/170.jpg)
Effect of a Wage Increase
Consumption Consumption
Leisure Pre-Tax Income
a. Leisure b. Pre-Tax Income
a
ab
c
c
![Page 171: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/171.jpg)
A Tax Threshold
Consumption Consumption
Leisure Pre-Tax Income
a. Leisure b. Pre-Tax Income
a a
b
cc
b
wzT * *z
![Page 172: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/172.jpg)
Several Thresholds
Consumption Consumption
Leisure Pre-Tax Income
a. Leisure b. Pre-Tax Income
![Page 173: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/173.jpg)
Taxation and the Participation Decision
mT mw
Consumption Consumption
Leisure Pre-Tax Income
a. Leisure b. Pre-Tax Income
T
![Page 174: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/174.jpg)
Labor Supply ElasticitiesSource: Blundell (1992)
Married Women Married Men Lone Mothers
US UK US UK US UK
Uncompensated wage
0.45 0.43 0.03 -0.23 0.53 0.76
Compensated wage
0.90 0.65 0.95 0.13 0.65 1.28
Income -0.45 -0.22 -0.98 -0.36 -0.18 -0.52
![Page 175: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/175.jpg)
Taxation and the Consumption Function
z
x
o45
Tzc
z
zT ˆx
![Page 176: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/176.jpg)
Agent Monotonicity
z
x
z
x
Low-skill
High-skill
![Page 177: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/177.jpg)
Income and Skill
z
x
Low-skillHigh-skill
a
![Page 178: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/178.jpg)
Upper Limit on Tax Rate
z
x
![Page 179: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/179.jpg)
Lower Limit on Tax Rate
z
x
1c
2c1h
2h
1l2l
![Page 180: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/180.jpg)
Zero Marginal Rate of Tax
z
x
A
B
C
D
b
o45
![Page 181: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/181.jpg)
Allocations and the Consumption Function
z
x
Low-skill
High-skill
laha
![Page 182: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/182.jpg)
The Utilitarian Case ( = 0)
Income Consumption Average tax (%)
Marginal tax (%)
0 0.03 - 23
0.055 0.07 -34 26
0.10 0.10 -5 24
0.20 0.18 9 21
0.30 0.26 13 19
0.40 0.34 14 18
0.50 0.43 15 16
![Page 183: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/183.jpg)
Some Equity Considerations ( = 1)
Income Consumption Average tax (%)
Marginal tax (%)
0 0.05 - 30
0.05 0.08 -66 34
0.10 0.12 -34 32
0.20 0.19 7 28
0.30 0.26 13 25
0.40 0.34 16 22
0.50 0.41 17 20
![Page 184: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/184.jpg)
Differential Taxation and Non-Separability
2x
1hI
I
1x
p'p
2hI
![Page 185: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/185.jpg)
Chapter 16Tax Evasion
Figures and Tables
![Page 186: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/186.jpg)
Hidden Economy as % of GDP, Average Over 1990-93
Source: Schneider and Enste (2000)
Developing Transition OECD
Egypt 68-76% Georgia 28-43% Italy 24-30%
Thailand 70% Ukraine 28-43% Spain 24-30%
Mexico 40-60% Hungary 20-28% Denmark 13-23%
Malaysia 38-50% Russia 20-27% France 13-23%
Tunisia 39-45% Latvia 20-27% Japan 8-10%
Singapore 13% Slovakia 9-16% Austria 8-10%
![Page 187: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/187.jpg)
Interior Choice: 0 < X* < Y
cY
ncY
Yt1
Yt1 Y
YFt 11 0X
YX
*X
![Page 188: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/188.jpg)
Corner solutions
cY
ncY
Yt1
Yt1 Y
YFt 11
YX *
cY
ncY
Yt1
Yt1 Y
0* X
YX * :a 0 :b * X
YFt 11
![Page 189: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/189.jpg)
Increase in Detection ProbabilitycY
ncY
Yt1
Yt1 Y
YFt 11
new
old
![Page 190: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/190.jpg)
Increase in the Fine RatecY
ncY
Yt1
Yt1 Y
oldXnewX
YFt 11
YFt ˆ11
![Page 191: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/191.jpg)
Income IncreasecY
ncY
Yt1
Yt1 Y
YFt 11
oldXnewX
Y
YFt ˆ11
Yt ˆ1
Yt ˆ1
![Page 192: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/192.jpg)
Tax Rate IncreasecY
ncY Yt1 Y
YFt 1ˆ1
oldX
newX
YFt 11
Yt1
Yt1
Yt1
![Page 193: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/193.jpg)
Declaration and IncomeSource: Mork (1975)
Income interval 17-20 20-25 25-30 30-35 35-40
Midpoint 18.5 22.5 27.5 32.5 37.5
Assessed income 17.5 20.6 24.2 28.7 31.7
Percentage 94.6 91.5 88.0 88.3 84.5
![Page 194: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/194.jpg)
Explanatory FactorsSource: Spicer and Lundstedt (1976)
Variable Propensity to evade Extent of evasion
Inequity 0.34 0.24
Number of evaders known
0.16 0.18
Probability of detection
-0.17
Age -0.29
Experience of adults 0.22 0.29
Income level -0.27
Income from wages and salaries
0.20
![Page 195: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/195.jpg)
The Audit Game
CFTFTY ,
CTTY ,
0 ,Y
TTY ,
No AuditAudit
Evasion
No Evasion
Taxpayer
Revenue Service
![Page 196: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/196.jpg)
Equilibrium Compliance
CompliancePayoff
Non-compliancePayoff
Non-compliance Rate0 1
![Page 197: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/197.jpg)
Chapter 17Fiscal Federalism
Figures and Tables
![Page 198: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/198.jpg)
The Costs of Uniformity
0GAG BG Public GoodLevel
UtilityLevel
AUBU
![Page 199: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/199.jpg)
Centralization and Decentralization
[ [ ]]
[ ]
Centralized
Decentralized
Region L Region R
0
0
1
1
![Page 200: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/200.jpg)
Political Accountability and Voter Welfare
State a State b
Policy A
Policy B
0, 3 r, 0
r, 1 0, 1
![Page 201: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/201.jpg)
Regional Distribution of Income
State a State b
Region a
Region b
ayay
by by
![Page 202: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/202.jpg)
Share of Central Government Expenditure in Total Expenditures
Source: Vernon Henderson's dataset, 1975-1995, Brown University
Countries 1975 1985 1995
Developed 0.57 0.49 0.46
Russia n.a. 0.61 0.63
Latin America 0.76 0.71 0.70
Asia 0.79 0.74 0.72
Africa 0.88 0.86 0.82
World 0.76 0.68 0.64
![Page 203: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/203.jpg)
Local Expenditures as a % of Total Government Expenditure by Function (1995-1999)
Source: IMF Government Finance Statistics Yearbook, 2001
Country Education Health Social Welfare Housing Transport Total
Australia 72 48 10 77 85 50
Canada 94 96 31 74 90 60
Denmark 45 95 55 29 51 56
France 37 2 9 82 42 19
Germany 96 28 21 93 57 38
Ireland 22 48 6 70 43 25
Netherlands 33 5 14 79 35 26
Norway 63 78 19 87 31 38
Russia 83 90 10 96 68 39
Spain 71 63 6 93 62 36
UK 68 0 20 40 61 26
US 95 43 31 32 75 49
Average 64 64 18 71 56 38
![Page 204: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/204.jpg)
Chapter 18Fiscal Competition
Figures and Tables
![Page 205: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/205.jpg)
Allocation of Capital
1' kf 2' kf
2010
1k 2k
21 tt
211 , ttk
![Page 206: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/206.jpg)
Symmetric Nash Equilibrium
21 tt
12 tr
21 tr
1t
2t
![Page 207: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/207.jpg)
The Advantage of Smallness
1' kf 2' kf
2010
1k 2k
R R
1g
1c
2c
2g
*2
*1 ,kk
1t
2t
![Page 208: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/208.jpg)
Tax Overlap
Price
Quantity
0t
0T
0p
0q1q
1p
D
S
![Page 209: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/209.jpg)
Matching Versus Lump-Sum Grant
PrivateGood
PublicGood
Lump-SumGrant
MatchingGrant
![Page 210: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/210.jpg)
Statutory Corporate Income TaxSource: Devereux et al. (2002)
1982 2001
Austria 61 34
Belgium 45 40
Canada 45 35
Finland 60 28
France 50 35
UK 53 30
Germany 62 38
Greece 42 38
Ireland 10 10
Italy 38 40
Japan 52 41
Netherlands 48 35
Portugal 55 36
Sweden 61 28
USA 50 49
![Page 211: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/211.jpg)
Statutory and Effective Corporate Income Tax Rates
Source: Devereux et al. (2002)
82 84 86 88 90 92 94 96 98 01
Median statutory 50 48 46 43 39 38 37 36 37 35
Average effective 43 42 41 38 36 37 36 36 34 32
![Page 212: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/212.jpg)
Chapter 19Intertemporal Efficiency
Figures and Tables
![Page 213: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/213.jpg)
Generational Structure
timet 1t 2t 3t 4t
Generation t
Generation t+1Generation t+2
Generation t+3
![Page 214: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/214.jpg)
Consumer Choice
ttx
1ttx
tw
11 tt rw
Consumptionwhen Young
Consumption when Old
![Page 215: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/215.jpg)
Consumption Possibilities
1x
2x
0k
large k
increases k
![Page 216: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/216.jpg)
Steady-State Equilibrium
1x
2x
Gradient
Equilibrium
a
b
)('11 kfr
![Page 217: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/217.jpg)
Golden Rule and Competitive Equilibrium
1x
2x
Gradient– [1+n]
Golden Rule Allocation
*1x
*2x
![Page 218: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/218.jpg)
Gross Profit minus Investment as a Proportion of GDP
Abel, Mankiw, Summers and Zeckhauser (1989)
Year England France Germany Italy Japan US
1964 9.4 13.6 8.5 22.9 15.2 6.9
1970 7.5 11.8 7.8 18.9 11.6 5.6
1975 6.0 10.9 12.4 16.6 6.8 14.4
1980 10.1 8.3 8.4 12.9 7.5 10.2
1984 13.9 12.9 13.8 17.3 9.4 6.7
![Page 219: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/219.jpg)
Chapter 20Social Security
Figures and Tables
![Page 220: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/220.jpg)
Dependency Ratio (Population over 65 as a proportion of population 15 - 64)
Source: OECD (www.oecd.org/dataoecd/40/27/2492139.xls)
1980 1990 2000 2010 2020 2030 2040
Australia 14.7 16.7 18.2 19.9 25.9 32.3 36.1
France 21.9 21.3 24.5 25.4 32.7 39.8 45.4
Japan 13.4 17.2 25.2 34.8 46.9 51.7 63.6
UK 23.5 24.1 24.1 25.3 31.1 40.4 47.2
US 16.9 18.9 18.6 19.0 25.0 32.9 34.6
![Page 221: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/221.jpg)
Annual Income and Cost Forecast for OASI Source: www.ssa.gov/OACT/TR/TR04
0
2
4
6
8
10
12
14
16
18
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
Income Rate
Cost Rate
![Page 222: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/222.jpg)
Forecasts for UK Basic State PensionSource: UK Department of Work and Pensions
(www.dwp.gov.uk/asd/asd1/abstract/Abstrat2003.pdf)
Date Rate as a % of average earnings
1975 39.3
1980 39.4
1985 35.8
1990 29.1
1995 28.3
2000 25.7
![Page 223: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/223.jpg)
Pareto-Improvement and Social Security
Consumption when Young
Consumption when Old
2/1
2/1
1
1
*2*1 , xx
![Page 224: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/224.jpg)
Population Growth and Consumption Possibilities
1x
2x
InitialFrontier
Frontier afterIncrease in n
Gradient n 1
![Page 225: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/225.jpg)
Population Growth and Consumption Possibilities
1x
2x
0e1e
![Page 226: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/226.jpg)
Population Growth and Social Security
1x
2x
Initial Frontier
NewFrontier
Initial Golden Rule Allocation
New Golden Rule Allocation
![Page 227: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/227.jpg)
Social Security Game
Contribute Don’t contribute
Contribute
Don’t contribute
5, 5
2, 2
0, 10
10, 0
Player 1
Player 2
![Page 228: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/228.jpg)
Gains and Losses in transitionSource: Miles (1998)
Age in 1997 UK Europe
57 0 0
50 – 57 -0.09 -0.6
50 – 50 -1.1 -2.3
30 – 40 -3.0 -5.7
20 – 30 -3.8 -7.2
10 – 20 -2.3 -4.2
0 – 10 0.7 1.7
-10 – 0 3.95 9.2
-20 - -10 6.5 15.7
-40 - -30 7.4 18.7
< -40 7.2 18.9
![Page 229: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/229.jpg)
Age of the Median VoterSource: Galasso and Profeta (2004)
Country Year Age of median voter
France2000 43
2050 53
Germany2000 46
2050 55
Italy1992 44
2050 57
Spain2000 44
2050 57
UK2000 45
2050 53
US2000 47
2050 53
![Page 230: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/230.jpg)
Chapter 21Economic Growth
Figures and Tables
![Page 231: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/231.jpg)
Dynamics of the Capital Stock
0
0.5
1
1.5
2
2.5
3
3.5
4
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 t
tk
![Page 232: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/232.jpg)
The Steady State
kf
ksf
kn
k
Consumption
Capital
Output
![Page 233: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/233.jpg)
The Golden Rule
kf
kn
*k
Consumption
Capital
Output
![Page 234: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/234.jpg)
Consumption and the Saving Rate
s
c
![Page 235: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/235.jpg)
Welfare Cost of TaxationSource: Chamley (1981)
Initial tax
rate (%)
Increase in
consumption (%)
Welfare cost
(% of tax revenue)
30 3.30 11
50 8.38 26
![Page 236: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/236.jpg)
Tax Rate and Consumption Growth
t
tt
C
CC 1
![Page 237: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/237.jpg)
Level and Growth Effects
Time
Output
1
2
3
a
c
b
e
d
0t 1t
![Page 238: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/238.jpg)
Growth Effects of Tax Reform
Capital 0%
Labor 0%
Growth 2.74%
Capital 0%
Labor 0%
Growth 4.00%
Capital 30%
Labor 20%
Growth 0.50%
Capital 0%
Labor 46%
Growth 1.47%
Final Position Additional Observations
Initial Tax Rates and Growth Rate
Utility Parameters
FeaturesAuthor
Capital and consumption different goods, consumption tax replaces income taxes
Capital 42%
Labor 20%
Growth 1.51%
= 2
= 0.5
Production of human capital requires physical capital
Pecorino (1993)
10% increase in capital stock
29% increase in consumption
Capital 21%
Labor 31%
Growth 2.00%
= 2
= 4.99
calibrated given
Time and physical capital produce human capital
Jones, Manuelli and Rossi (1993)
Labor supply is inelastic
Capital 20%
Labor 20%
Growth 1.02%
= 2
= 0
Production of human capital requires physical capital (proportion = 1/3)
King and Rebelo (1990)
33% increase in capital stock
6% increase in consumption
Capital 36%
Labor 40%
Growth 1.50%
= 2
= 0.5
Production of human capital did not require physical capital
Lucas (1990)
Capital 0%
Labor 0%
Growth 2.74%
Capital 0%
Labor 0%
Growth 4.00%
Capital 30%
Labor 20%
Growth 0.50%
Capital 0%
Labor 46%
Growth 1.47%
Final Position Additional Observations
Initial Tax Rates and Growth Rate
Utility Parameters
FeaturesAuthor
Capital and consumption different goods, consumption tax replaces income taxes
Capital 42%
Labor 20%
Growth 1.51%
= 2
= 0.5
Production of human capital requires physical capital
Pecorino (1993)
10% increase in capital stock
29% increase in consumption
Capital 21%
Labor 31%
Growth 2.00%
= 2
= 4.99
calibrated given
Time and physical capital produce human capital
Jones, Manuelli and Rossi (1993)
Labor supply is inelastic
Capital 20%
Labor 20%
Growth 1.02%
= 2
= 0
Production of human capital requires physical capital (proportion = 1/3)
King and Rebelo (1990)
33% increase in capital stock
6% increase in consumption
Capital 36%
Labor 40%
Growth 1.50%
= 2
= 0.5
Production of human capital did not require physical capital
Lucas (1990)
![Page 239: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/239.jpg)
US Tax and Growth Rates Source: US Department of Commerce: www.bea.doc.gov/
-15
-10
-5
0
5
10
15
20
25
30
1950 1960 1970 1980 1990 2000
![Page 240: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/240.jpg)
UK Tax and Growth RatesSource: Feinstein (1972), UK Revenue Statistics, Economic
Trends
-15
-10
-5
0
5
10
15
20
25
1910 1920 1930 1940 1950 1960 1970 1980
![Page 241: Figures and Tables. Chapter 2 Equilibrium and Efficiency Figures and Tables.](https://reader037.fdocuments.net/reader037/viewer/2022102713/56649d535503460f94a2ecf0/html5/thumbnails/241.jpg)
Average and Marginal Tax Rates
1Y 2Y Y
Post-TaxIncome
Pre-TaxIncome