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Tagging and Redistributive Taxation with Imperfect Disability Monitoring

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  • Laurence jacquet

    ()
    (THEMA, Universite de Cergy-Pontoise and THEMA)

Abstract

This paper studies the optimal income redistribution and optimal monitoring when disabil- ity bene?ts are intended for disabled people but some of the disabled do not claim disability bene?ts and enter the labor force. Classi?cation errors also occur. Some able applicants with high distaste for work are falsely granted disability bene?ts (type II errors) and some disabled applicants are denied disability bene?ts (type I errors). The accuracy of monitoring depends on the resources devoted to it. Labor supply responses are at the extensive margin. The paper derives the optimal income tax-transfer schedule that incorporates welfare and disability ben- e?ts and takes into account monitoring costs. The cost of monitoring and the co-existence of welfare and disability bene?ts play in favor of Earned Income Tax Credits for disabled workers who forgo disability bene?ts as well as for disabled workers who forgo welfare assistance.

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Bibliographic Info

Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2013-01.

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Date of creation: 2013
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Handle: RePEc:ema:worpap:2013-01

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