Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 4

In the accompanying diagram, WH is the budget line resulting from labor market work. Describe the characteristics of the income maintenance programs implicit in budget lines HBW , HBYW, and HBW. Given an individual's work-leisure preferences, which program will entail the strongest disincentives to work Why Which entails the weakest disincentives to work Why "The higher the basic benefit and the higher the benefit reduction rate, the weaker the work incentive." Do you agree