ECON 3240 Lecture Notes - Lecture 3: Child Care, Fixed Cost, Natural Experiment
Document Summary
Public policy goal = poverty reduction: support indv when they cannot work due to illness/unemployment, who cannot earn enough to support themselves/families. But income support programs create disincentives for work: raise reservation wages, create tax on earnings @ low levels. Balance policy obj of poverty reduction & social insurance w/negative labour supply effects. Lump sum transfer to specific demographic group (e. g. single parents, persons over 60, families ) Old age security (oas) monthly payments to ppl over 65. Overall effect = demogrant = pure income effect, both consumption & leisure, hours worked: welfare. Eligible for welfare if income falls below define threshold: threshold varies by province & other characteristics (+ family type) Traditional welfare scheme: guaranteed level of income benefits = to yb when person works 0 hours, benefits reduced 1 for 1 w/earnings. Effects of traditional welfare scheme: reservation wage, discourages indv from working for wage @ which they might otherwise be willing to work a.
