1. Assume that a state government currently provides no child care subsidies to working single parents, excluding that it currently wants to adopt a plan that will encourage labor force participation among single parents. Assume that child care costs are hourly, as well as presume the government adopts a child-care subsidy that pays $3 per hour for each hour the parent works, up to 8 hours per day. Draw a current budget constraint for an assumed single mother (net of child care costs), and after that draw in the new constraint. Discuss the likely effects on labor force participation and hours of work.
2. A state government wants to provide incentives for single parents to enter the labor market and become engaged. It is allowing for a policy of paying single parents of children under the age of 18 $20 per day if the parent works at least 6 hours for every day i.e. 5 days a week. Draw an assumed current daily budget constraint for a particular parent, furthermore draw in the constraint that would be created by the $20 subsidy.
Discuss the likely effects on (a) labor force participation and (b) hours of work