Suppose the government were to change

Reference no: EM13850054

Suppose the government were to change it's income assistance program from a welfare system with a basic benefit of B and a 100% clawback rate to a negative income tax program with the same basic benefit B and a 60% clawback rate.

Illustrate the two budget constraints in a single diagram. Be sure to label all slopes and intercepts.
Can the change in the clawback rate from 100% to 60% ever cause the labour force participation rate to fall? Explain with reference to clearly labeled diagrams.
Can the change in the clawback rate from 100% to 60% ever cause the number of people receiving income support to increase? Explain with reference to clearly labeled diagrams.
Can the change in the clawback rate from 100% to 60% ever cause the total cost of the income assistance program to increase? Explain.

Reference no: EM13850054

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