Optimality of Workfare with Heterogeneous Preferences
AbstractUsing the standard nonlinear income taxation framework with heterogeneity of preferences, this paper examines the optimality of workfare as a screening tool. 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, workfare is never optimal to impose 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 (1997), and Beaudry and Blackorby (1997).
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 968.
Length: 33 pages
Date of creation: Feb 1998
Date of revision:
Workfare; Nonlinear income taxation;
Other versions of this item:
- Katherine Cuff, 2000. "Optimality of workfare with heterogeneous preferences," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 149-174, February.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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