What is the percentage change in workers wealth

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Assignment:

Suppose Washington gets a $4M grant from the government and so doesn't need to levy a tax. Mayor Rita wants to use the program to fight poverty. Andrew Tang tells the mayor to implement a universal basic income because it doesn't distort incentives and is the most efficient.

1. Explain what Andrew Tang means by "does not distort incentives and is the most efficient?"

2. Draw the benefit schedule, labeling how much workers get.

3. What is the percentage change in workers' wealth, the dollar value of their time plus unearned income?

4. Suppose all residents have an elasticity of weeks worked to income η = -0.1. Estimate the decrease in weeks worked for each group of workers. Do they all respond the same? Explain.

5. How much does each group earn? What is the total earned income in Washington.

6. How much disposable income (earned income plus transfer) does each group have?

Reference no: EM133412227

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