Reference no: EM133132610

1.Child Labor. Suppose each child's total time T is allocated between home time (H) and employment (L=T-H), where H is a normal good. The household has an endowment M. Prior to the policy, the household's optimal decision involves having the child work for some positive hours L1. Analyze the impact of the following policy on (a) the well-being and (b) the amount of time spent working:

(a)A strict upper limit on the number of hours that a child can work (6 points).The government enforces a maximum number of hours a child could work, ¯L. Draw the constraint implied by this policy and analyze the impact.The effects will differ depending on the child's initial working hours L1. Consider the case when (i )L1< ¯Land (ii) L1> ¯L.

(b) A conditional cash transfer policy. This policy will give poor households cash if the children in the household spent at least H hours in school. To simplify,suppose that all home time not spent working is spent in school. Also, going to school is costless. As in (a), analyze the impact of this policy.As in (a), the effects will differ depending on the child's initial working hours L1. Consider the case when (i) (T-L1)> Hand (ii) (T-L1)< H.

(c)Summarize the impacts of the two policies above on the well-being of house-holds and hours of child labor, considering the different initial number of child labor before the policy. Compare their impacts to the unconditional cash transfer policy.