The labor supply responses to programs designed to help equalize incomes can either narrow or widen the

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“The labor supply responses to programs designed to help equalize incomes can either narrow or widen the dispersion of earnings.”

Comment on this statement in the context of an increase in the subsidy paid under a “negative income tax” program to those who do not work. Assume that this program creates an effective wage that is greater than zero but less than the market wage, and assume that this effective wage is unchanged by the increased subsidy to those who do not work.

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