benjamin5_PPT_03

benjamin5_PPT_03 - Chapter Three Labour Supply and Public...

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Chapter 3-1 Chapter Three Labour Supply and Public Policy: Work Incentive Effects of Alternative Income Maintenance Schemes
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Chapter 3-2 Learning Objectives Income Maintenance Schemes Demogrant Welfare Programs Negative Income Tax Wage Subsidy Earned Income Tax Credit Unemployment Insurance Workers Compensation Childcare Subsidies
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Chapter 3-3 Income Maintenance Schemes Designed to supplement low incomes No single program can address the multiple reasons for low income Difficult for policy makers to design the ideal program
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Chapter 3-4 Income Maintenance Schemes
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Chapter 3-5 Characteristics of a Demogrant Lump sum transfer Income grant Specific to a demographic group Old Age Security (OAS) Universal
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Chapter 3-6 demogrant Work Incentive Effects of a Lump Sum Demogrant 0 U 0 T E 0 -income constraint shifts up by amount of the grant - slope is the same and there is no substitution effect - if working time is not altered the equilibrium is E 1 Income Leisure U 1 E 1 Y 1 U d E d Y d
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Chapter 3-7 Work Incentive Effects of a Lump Sum Demogrant No substitution effect Work incentives are reduced Pure leisure - inducing income effect Increase in income is less than the demogrant (used to buy leisure)
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Chapter 3-8 Welfare Administered by the provinces Financed partly by the federal government Benefits depend on needs of the family, assets other sources of income
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Chapter 3-9 Welfare: 100% “Claw-Back” 0 U 0 T E 0 - at max leisure the income constraint shifts vertically up by the welfare payment - potential income constraint is horizontal at the amount of the welfare payment -strong incentive to move to corner solution Welfare benefit Y 0 U w E w Y w
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benjamin5_PPT_03 - Chapter Three Labour Supply and Public...

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