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Optimality of workfare with heterogeneous preferences

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Author Info
Katherine Cuff

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Abstract

With the standard non-linear income taxation framework with heterogeneity of preferences, in this paper the optimality of workfare as a screening tool is examined. It is assumed that workfare does not serve as a human capital investment, participation is mandatory, and administrative costs are negligible. Imposing alternative cardinalizations on individuals utilities allows for the possibility that the government optimally redistributes income to or from high disutility of labour individuals. Under either case, it is never optimal to impose workfare on these individuals. It is also shown that non-productive workfare can be an efficient policy tool, in contrast to the results found in Besley and Coate (1995), Brett (1998), and Beaudry and Blackorby (1997).

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 33 (2000)
Issue (Month): 1 (February)
Pages: 149-174
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Handle: RePEc:cje:issued:v:33:y:2000:i:1:p:149-174

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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

Cited by:
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  1. Jordahl, Henrik & Micheletto, Luca, 2002. "Optimal Utilitarian Taxation and Horizontal Equity," Working Paper Series 2002:19, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Robert A. Moffitt, 2003. "The Negative Income Tax and the Evolution of U.S. Welfare Policy," NBER Working Papers 9751, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Claus Thustrup Kreiner & Torben Tranæs, 2003. "Optimal Workfare with Voluntary and Involuntary Unemployment," EPRU Working Paper Series 03-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2004. [Downloadable!]
    Other versions:
  4. Raghbendra Jha & Bagala Biswal & Urvashi D. Biswal, 2001. "An Empirical Analysis of the Impact of Public Expenditures on Education and Health on Poverty in Indian States," Working Papers 998, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
  5. Robert Moffitt, 2002. "Welfare Programs and Labor Supply," NBER Working Papers 9168, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Christian Holzner & Volker Meier & Martin Werding, 2006. "Workfare, Monitoring, and Efficiency Wages," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  7. Beaudry, Paul & Blackorby, Charles & Szalay, Dezso, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs (Revised Version)," The Warwick Economics Research Paper Series (TWERPS) 779, University of Warwick, Department of Economics. [Downloadable!]
  8. Beaudry, Paul & Blackorby, Charles, 2004. "Taxes And Employment Subsidies In Optimal Redistribution Programs," The Warwick Economics Research Paper Series (TWERPS) 708, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  9. Blomquist, Sören & Christiansen, Vidar, 2004. "Welfare Enhancing Marginal Tax Rates: The Case of Publicly Provided Day Care," Arbetsrapport 2004:6, Institute for Futures Studies. [Downloadable!]
  10. Stefan Homburg, 2003. "Arbeitslosigkeit und soziale Sicherung," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 68-82. [Downloadable!] (restricted)
  11. Robert Moffitt, 2006. "Welfare Work Requirements with Paternalistic Government Preferences," NBER Working Papers 12366, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Claus T. Hansen & Torben Tranaes, 2000. "Optimal Workfare in a Society of Workers and Non-Workers," Econometric Society World Congress 2000 Contributed Papers 0758, Econometric Society. [Downloadable!]
  13. Michel, DE VROEY, 2006. "Getting Rid of Keynes ? A reflection on the history of macroeconomics," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2006051, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  14. Laurence Jacquet, 2006. "Optimal disability assistance when fraud and stigma matter," Working Papers 1098, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
  15. Homburg, Stefan & Lohse, Tim, 2004. "Optimal Tax-Transfer-Schemes under Partial Information," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-298, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  16. Homburg, Stefan, 2002. "Arbeitslosigkeit und zweitbeste Steuer-Transfer-Systeme," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-262, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  17. Robert Moffitt, 2002. "Milton Friedman, the Negative Income Tax, and the Evolution of US Welfare Policy," Economics Working Paper Archive 486, The Johns Hopkins University,Department of Economics.
  18. Soeren Blomquist & Vidar Christiansen, 2003. "Is there a Case for Public Provision of Private Goods if Preferences are Heterogeneous? An Example with Day Care," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  19. Robin Boadway & Pierre Pestieau, 2002. "Indirect Taxation and Redistribution: The Scope of the Atkinson-Stiglitz Theorem," Working Papers 1005, Queen's University, Department of Economics. [Downloadable!]
  20. Robin Boadway, 1998. "Redistributing Smarter: Self-Selection, Targeting and Non-Conventional Policy Instruments," Canadian Public Policy, University of Toronto Press, vol. 24(3), pages 365-369, September. [Downloadable!] (restricted)
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