Assume Workers Comp awards $X to workers not working because of an injury. $X is set to equal the workers previous wages. Once workers return to work, the award payments stop. Suppose the government were to implement a new program in which recipients were awarded $0.5X, but were allowed to work; in addition, those who worked would earn a wage subsidy of 20 percent of their wages per hour worked, in addition to their wages. Discuss the changes in work incentives associated with this change in the law.
The question belongs to Economics and it discusses about the change in work incentives associated with the change in law.
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