4.9 George views leisure as a normal good. He works at a job that pays w an hour. Use a labor-leisure analysis to compare the effects on the hours he works from a marginal tax rate on his wage, v, or a lump-sum tax (a tax collected regardless of the number of hours he works), T. If the per-hour tax is used, he works 10 hours and earns (1 - v)10w.

The government sets T = v10w, so that it collects the same amount of money from either tax. Which tax is likely to reduce George’s hours of work more, and why? (Hint: See Solved Problem 5.4.)