1. Consider the Galor-Zeira model. Using the two main diagrams, evaluate the e§ect of on human capitalformation (and therefore income per capita) in the short-run and in the long-run
(a) An increase in wages of skilled workers,ws(e.g., skilled-biased technological change, reductionin the income tax on the (educated) middle class)
A reduction in the interest rate for borrowers,i(i.e., improvements in the e¢ciency of capitalmarkets).
b) An increase in the wages of unskilled workers,wu(e.g., an increase in government transfer, or areduction in the tax rate, on the poor)
c.)A reduction in the interest rate for borrowers,i(i.e., improvements in the e¢ciency of capitalmarkets).
(d) A reduction in the cost of education to all individuals,h(e.g., direct subsidy to schools and universities)(Note, in each of the parts evaluate the e§etc of the policy on the value offa
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