Answer to Question #296556 in Microeconomics for nabil

Question

A 1996 bill reforming the federal government’s anti-

poverty programs limited many welfare recipients to

only two years of benefits.

a. How does this change affect the incentives for

working?

b. How might this change represent a trade-off

between equality and efficiency?

Answer 1

a) This program increases the incentive to work as the beneficiaries can only benefit for two years maximum and then from there there is nothing.

(b) This change represents a trade-off between equality and efficiency as it increases efficiency at the cost of equality due to the temporary nature of the benefits which creates pressure for the beneficiaries to look for jobs.