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I am doing a homework for my economics class and I have a few questions. I would like to know what are the effects of government policy on economic behavior please.
I have started my work but I am still missing some impacts of policies.
- State provision: those in poverty gain access to services they otherwise wouldn't be able to afford. But free access to these services reduces the incentive to work and is expensive to provide.
- Progressive taxation: progressive taxation helps to reduce relative poverty, but it can also contribute to the poverty trap. Also, if high income earners are taxed too much, there is a risk that some of them will move abroad to an economy where they are less taxed. This could result in a loss of labor and money from the economy.
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