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paraphrasing economy homework

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Hi, I have an answer for an assignment need to paraphrasing.

It is an easy work it is only one page. Please paraphrase with out changing the content. Make it looks well please.

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What Explains Income Differences Across Countries Equation Theory Economies in Developed Countries Economies in Developing Countries Institutional Theory Income Level Explaining why some countries are rich and why some are poor can be explained through two theories: equation theory and institutional theory. Equation allows us to algebraically look at how we manipulate the different inputs to maximize output while institution focuses on the practices within a country and its effect on the economy. The main point of focus here is how the rental rate on capital, less depreciation and capital income taxes, affects the rate of return on capital. By looking at the equation, we must set an equilibrium. Households demand a certain after-tax and after-depreciation return on capital (as denoted in the equation by 1 less tax rate and capital less depreciation). That figure leftover is equal to the rate of return on capital. Therefore, the tax rate greatly affects the rate of return on capital as seen in the equation. Labor (income tax) and capital must go hand-in-hand. High capital income tax rates will discourage accumulation of capital which will then lead to lower wages. Higher rates of taxation on capital income actually tends to make workers worse off. So, when tax rates on capital are relatively high, the levels of capital output and wages are relatively low. In a poorer countries, corrupt government entities impose a higher capital income tax (i.e. bribes). Therefore, because of this high tax, firms are unable to accumulate capital. Thus they are unable to pay their workers sufficient wages and therefore, the economy is unable to flourish as they don’t have the income to then put back into the economy. The opposite holds true for wealthier, developed nations such as the US. Growth Volatility Policies Institutional theory, on the other hand, is based on concepts and policies within a country. Institution theory looks at the policies that a particular country has in place and how it affects the economy and real GDP. Institutional theory is studied by looking at four components: income level, growth, volatility, and policies and how they are all correlated. When looking at income, economic outcomes could be substantially improved if developed countries strengthen their institutions. The income gain is much larger if institutional quality rises to the level of advanced economies as we see in developed countries. Institutions are also directly correlated to volatility. Therefore, the better the institutions, the lower the volatility of growth. Institutional improvements could have significant impact on growth rates and as a result, institutions have a strong and significant impact on GDP growth. When institutional and policy variables are considered together, institutions are found to be the dominant influence on economic performance, with policies having little independent influence. However, a country’s level of financial development, which may be highly influenced by policy, has a significant positive impact on growth. Institutions are very important as seen in developed countries because lack of them can lead to corruption and stagnant growth as seen in the developing countries. Institutional theory is based on concepts. Equation theory stipulates income tax and deprecation are driving factors as seen through the equation. This theory depicts institution theory by using numbers to algebraically show how changes in taxes and depreciation affect real-GDP. Both theories suggest growth and development be allocated towards finding equilibrium with the rate of return on capital and also having a solid foundation such as institutions to ensure growth. In summation, both concepts are looking to find an equilibrium within the country to ensure a growing economy. Equation theory looks at how increases/decreases in taxes or depreciation affect that equilibrium while institution theory looks at social factors and their effect on the equilibrium. Both theories are vital for economic growth and development and both illustrate the same concept but demonstrate them in different ways. ...
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Final Answer

Here you go. In case of any further inputs, please let me know.All the best!I appreciate working with you!


Economic growth and development




There are two types of countries in the world today, rich and developing countries. There are
theories to explain the income differences across the countries. These appr...

CASIMIR (25070)
New York University

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