If welfare benefits equal the poverty gap for each household in poverty,then

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If welfare benefits equal the poverty gap, then for every dollar earned above the poverty line, the household would lose a dollar of welfare benefits since they are no longer in poverty. This creates a disincentive to work and can trap individuals in poverty. This is known as the welfare cliff. The effective marginal tax rate for welfare recipients can be as high as 100 percent because of this cliff, meaning they lose all their benefits as soon as they earn one more dollar. This can create a cycle of poverty and dependence on welfare. Total output for the economy is not necessarily affected by this policy.

If Welfare Benefits Equal the Poverty Gap for Each Household