The Canada Education Savings Grant gives parents a grant of 20 cents for every dollar they save for their children’s education, up to a maximum of $2,000 in savings/$400 in grant. Some parents save more than others, and the average CESG per Canadian child is approximately $100.
a. Show that a $100 per child block grant makes parents better off than a matching grant that costs the government $100 per child.
b. What are the advantages and disadvantages of replacing the current matching grant program with a block grant?