EC306 Lecture Notes - Lecture 4: Old Age Security, Lump Sum, Child Tax Credit
Document Summary
Chapter 3 labour supply and public policy. A government program that provides financial assistance to people in need so that they can maintain a certain income level. Canadian governments spend over 10% of gdp on various income maintenance schemes. Designed to supplement low incomes, which can arise from a variety of reasons. No single program can address the multiple reasons for low income. Everyone receives the same transfer regardless of income. E. g. individuals ae 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. The basic income-leisure choice model is useful to analyze the work incentive effects of various income maintenance programs. Partial equilibrium effects: no dynamic changes over time or general equilibrium effects. Income support programs after behaviour through changes in the potential income constraint.
