Question

Participation in the labor force is much lower than it has historically been. How have government benefits, such as food stamps and housing subsidies, affected the labor-leisure choices of individuals?

Answer 1

Answer:-

There has been a large amount of criticism on food stamp programmes as they welfare recipient by giving more income that the take-home of income of a working poor. The basic welfare grant in the stamps is higher which further cause disincentive among the people to work.

Whereas the housing scheme which provides free assistance to the poor people in addressing their problem however its effect has been mixed but the ultimate answer depends on empirical analysis. In a simple static labour supply model the impact of household subsidy creates income and substitution effects and eventually results in shrinking of labour supply but in the real world the household subsidy is a given over a period a time which is long in months or years and it complicated the scenario hence proper effect cant be judged.