The Canadian government provides maternity benefits to eligible women when they take time off work following the birth or adoption of a child. Assume the following:

• the probability that women receive maternity benefits is 0< pW<1
• the probability that men receive maternity benefits is pM=0
• the value of maternity benefits isv
• the government pays maternity benefits directly to workers
• government funds the system via a payroll tax levied on firms
• the tax rate,t, is set so that the total amount of revenue collected by the government is equal to the total amount of benefits paid to workers

(1) How would you expect this scheme to affect the following outcomes forwomen? Illustrate your answers using one or more clearly labeled diagrams.

1. the level of employment
2. the wage received by female workers
3. the cost of female workers to firms
4. the total value of compensation received by female workers

(2) How would you expect this scheme to affect the following outcomes formen? Illustrate your answers using one or more clearly labeled diagrams.

1. the level of employment
2. the wage received by male workers
3. the cost of male workers to firms
4. the total value of compensation received by male workers

(3) Suppose instead that maternity benefits are mandated- i.e. the government requires firms to provide maternity benefits to women who have children and to pay the cost of these benefits themselves. How do answers to (i) and (ii) change? Illustrate and explain.

(4) Which system for delivering maternity benefits do you prefer, government provision funded by a payroll tax as in (1) and (2), or a mandatory benefit as in (3)? Explain.