Question

use the work leisure model to illustrate that if we hold the post-subsidy of income of the recipients constant or the size of the subsidy constant, a negative income tax will involve more adverse work incentives than a wage subsidy would

Answer 1

Using the work-leisure framework to illustrate that if we hold the post-subsidy income of the recipients constant, or the size of the subsidy constant, a negative income tax will involve more adverse work incentives than a wage subsidy would

identify so we can fix it up as a no effect of the substitution on the work, work incentives provided then and the amount is reduced, whole income is used to buy only leisure. Wage subsidy is another form tax earning scheme by the government. Government has reduced rates for it several things like Government Reduced Welfare Benefit, Reduce the tax, while there is an increase in the wage rate but there is a changes in the change of the preferences portrayed. As it has been said tax reduced because the person can utilise and save its earning more and continue the work as it wants to do.