Assume that the current disability benefit for individuals with disabilities that prevent them from working full time, is X kroner per day. The disability benefit goes to zero if a worker accepts a job for even one hour per week. Suppose that the benefit rules are changed so those disabled workers who take jobs that pay less than X kroner per day receive a benefit that brings their total daily income (wage plus the benefit) up to X kroner. When labor market earnings of a disabled individual rises above X kroner per day, their disability benefits end. Draw the old and the new budget constraints (label each clearly) associated with the disability benefit program, and analyze the work incentive effects of the change in benefits

Assume that the current disability benefit for individuals with disabilities that prevent them from working full time, is X kroner per day. The disability benefit goes to zero if a worker accepts a job for even one hour per week. Suppose that the benefit rules are changed so those disabled workers who take jobs that pay less than X kroner per day receive a benefit that brings their total daily income (wage plus the benefit) up to X kroner. When labor market earnings of a disabled individual rises above X kroner per day, their disability benefits end. Draw the old and the new budget constraints (label each clearly) associated with the disability benefit program, and analyze the work incentive effects of the change in benefits

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter15: Poverty And Economic Inequality

Section: Chapter Questions

Problem 3SCQ: Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so...

See similar textbooks

Similar questions

Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how a program that increased educational levels for a substantial number of low-skill workers could reduce inflame inequality.
Which set of policies is more likely to cause a tradeoff between economic output and equality: policies of redistribution policies aimed at the ladder of opportunity? Explain how the production possibility frontier tradeoff between economic equality and output might look in each case.
Assume that the current Disability Insurance (DI) benefi t for those whoare unable to work is $X per day and that DI benefi ts go to zero if aworker accepts a job for even 1 hour per week. Suppose that the benefi trules are changed so those disabled workers who take jobs that pay lessthan $X per day receive a benefi t that brings their total daily income(earnings plus the DI benefi t) up to $X. As soon as their labor marketearnings rise above $X per day, their disability benefi ts end. Draw theold and new budget constraints (label each clearly) associated with theDI program, and analyze the work-incentive effects of the change inbenefi ts.
How can a program that subsidizes housing for low income families avoid creating a poverty trap? O Have the benefits reduce only gradually as family income increases All of these could reduce help avoid the poverty trap but at a cost O Limit the amount of time people can use the benefit Create work requirements
2. Assume that in the state of Kentucky, Bill is guaranteed S400 of welfare benefits if he does not work at all. They are allowed a disregard of $100 and face a tax rate of 50%. He has a nonlabor income equal to zero and if the works he can carn a wage of $10 per hour. His total time is 200 hours a woek. a. How many hours of leisure is Bill consuming at his break even point? b. Graph the budget constraint, labeling the break even point and other breaks in the curve as well as slopes of each line. Draw Bill's indifference curves such that he chooses to work 5 hours a month.
What goods and services would you include in an estimate of the basic necessities for a family of four?
Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and 1991. Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve. How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles in the Lorenz curves?
Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table from question 1 to account for this change in policy. Draw Jonathans labor-leisure opportunity sets, both for before this welfare program is enacted and after it is enacted.
Will a free market tend to encourage or discourage discrimination? Explain briefly.
Jonathan is a single father with one child. He can work as a server for $6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of 10,000 per year. He can work and still receive government benefits, but for every 1 of income, his welfare stipend is 1 less. Create a table similar to Table 15.4 that shows Jonathans options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathans opportunity set with and without government support.
What is poverty and what are three of its harmful environmental and health effects? About whatpercentage of the world’s people struggle to live onthe equivalent of $1.90 a day? About what percentage have to live on $3.10 a day? How are povertyand population growth connected? List three majorhealth problems faced by many of the poor.
fmagine that somecne offered you a choice, You couldspend four years studying at the world 's best uni•versity, but you would have to keep your attendancethere a secret Or you could be awarded an official degree from the world's best university, but you couldn'.tactually attend. Which choice do you think wouldenhance your future earnings more? What does youranswer say about the debate over signaling versus human capital in the role of education?