An article in the Economist describes the views of Santiago Levy, a former official of the Inter-American Development Bank: “He thinks that Mexico . . . needs to replace restrictions on firing with unemployment insurance and shift the tax burden away from payrolls, abolish tax perks for small firms and take contract enforcement more seriously. The prize would be faster growth . . . and better-paid jobs.

a. Why might replacing legal restrictions on firing workers with unemployment insurance (which is the approach used in the United States) increase economic growth? 

b. What are the possible negative effects of taxing business payrolls rather than taxing incomes? 

c. What is a “tax perk”? Why might tax perks for small firms slow the rate of economic growth? (What might Levy have been assuming about the differences between small firms and large firms?) 

d. What does Levy mean by “contract enforcement”? Why might better contract enforcement increase economic growth?