Persistently high unemployment rates have stimulated debates whether or not the tax transfer system may be partly responsible for this problem. In particular, it has been pointed out that low earnings are subject to very high marginal tax rates. Among possible reform options are the negative income tax, negative marginal tax rates, and workfare. The paper evaluates these options analytically and shows that negative marginal tax rates or workfare do not have the desired impact on welfare.
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Koch, Susanne & Stephan, Gesine & Walwei, Ulrich, 2005.
"Workfare: Möglichkeiten und Grenzen,"
IAB Discussion Paper
200517, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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