Illustrate the impact of each of the two policies

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Reference no: EM132200409

Question: 1. Rising childcare costs can deter many individuals, particularly women, from working. According to a report by Which?, childcare costs increased by 32.8% for under twos and 36.2% for over twos between 2010 and 2015. In this question, you will be asked to consider the impact of two different policies to encourage more mothers to work:

Policy 1: a lump-sum or fixed subsidy to help cover the costs of childcare, which is of hours worked; paid regardless of the number.

Policy 2: a proportional subsidy, which depends on the number of hours worked. Assume that if these women work, they receive the constant market wage rate w per hour; if they don't work, they receive a benefit income equal to B.

(a) Using the individual labour supply model, illustrate the initial budget constraint facing these individuals.

(b) Illustrate the impact of each of the two policies on the individual budget constraint and the number of hours women choose to work.

(d) Could the policies encourage more women to participate in the labour market? Explain.

Reference no: EM132200409

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