1 Political Connections

All the questions in this Section refer to the paper:  Politicians at  Work:  The Private Returns and Social Costs of Political Connections (2013) - Cingano and Pinotti

1.1 Provide ONE argument in favor of the following state- ment: "The existance of politically connected firms is beneficial for a society" (Greasing the Wheel Hypoth- esis).

1.2 Provide ONE argument in favor of the following state- ment: "The existance of politically connected firm is detrimental for a society" (Grabbing Hand Hypothe- sis).

1.3 Report ONE piece of evidence that Cingano and Pinotti

(2013) provide in line with the "Grabbing Hand Hy- pothesis".

2 Pareto efficiency and social surplus

There are two citizens:  A and B .  An alternative is defined by z = /zA ﹐ zB、. Individual preferences are represented by uA (z) = zA , uB (z) = zB .

There are only 3 feasible alternatives:  z1  = (0 ﹐ 0), z2  = (2 ﹐ 2), and z3  = (1 ﹐ 10).

2.1 Which alternatives are Pareto efficient?

2.2 Which alternatives maximize social surplus?

Now suppose that A is altruistic and has preferences represented by

uA (z) = zA + ．