Chapter 03 - Lecture Outline

Chapter 03 - Lecture Outline - ChapterThree ChapterThree

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Chapter Three Chapter Three Labour Supply and Public Policy Labour Supply and Public Policy Chapter 3 1
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Income Maintenance Schemes Designed to supplement low incomes,  which can arise from a various number  of reasons No single program can address the  multiple reasons for low income Chapter 3 2
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Income Maintenance Schemes Chapter 3 3
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Income Maintenance Schemes Universal Programs vs. Targeted Programs Universal Programs Administratively simple Everyone receives the same transfer  regardless of income  Expensive Also benefits non-low income people  Chapter 3 4
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Income Maintenance Schemes Targeted Programs Cheaper method Individuals are given exactly enough of a  transfer to reach the poverty line Only those below poverty line would  receive transfer Creates a disincentive to earn income and,  hence, may cause individuals to reduce  work effort Chapter 3 5
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Income Maintenance Schemes Permanent or Transitory?   Compensating  low wages  or shortage of  hours  worked ? Low income may be due to the shortage of  hours   worked or  low wage  rate: Shortage of hours is mainly associated with the loss of   transitory income (needs transitory type policy)  Low wage rate, on the other hand, may represent  permanent low income (needs permanent type policy) Difficult to isolate permanent from transitory  Chapter 3 6
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  Demogrant Lump sum   transfer or income grant  (universal)  Specific to a demographic group
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Chapter 03 - Lecture Outline - ChapterThree ChapterThree

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