pubsec-anstops2

pubsec-anstops2 - BRANDEISU NIVERSITY Department f E...

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Economics 134 Public Sector Economics .r. 2 L,,-t (n Zo BRANDEIS UNIVERSITY Department of Economics Answers to Problem Set 2 Mr. Coiner Spring, 2009 l. Chapter 3, Question 14. a) Just looking at the data for "your state", it seems that consumption was Rising by l0 per year prior to the tax cut, then it rose by 30 instead of l0 after the tax cut. It seems a good estimate of the effect of the tax cut is to raise consumption by 20. b) With data on both states, we can use a difference-in-differences estimator. The assumption we make in doing this is that the other factors (aside from the tax cut) affecting consumption were operating in exactly the same way in both states. If that assumption is right, our best estimate of what the increase in consumption in our state WOULD HAVE BEEN without the tax cut is an increase of 20, the same increase that occuned between 1998 and 2000 in the neighboring state. Thus, it appears that the tax cut only caused an of l0 units (30 - 20). 2. Chapter 5, 7. The Marginal Private Cost of the l0'n unit is MC :
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This note was uploaded on 10/15/2011 for the course ECON 134 taught by Professor Coiner during the Spring '11 term at Brandeis.

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pubsec-anstops2 - BRANDEISU NIVERSITY Department f E...

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