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Income Assistance and Aggregate Disposable Income

Author

Listed:
  • Illoong Kwon

    (Seoul National University)

Abstract

This paper provides a simple theoretical model to analyze how income assistance affects the aggregate disposable income of recipients when a government cannot observe the recipients’ earning capabilities. If the recipients’ earning capabilities are uniformly distributed, means-tested linear income assistance benefits do not affect their aggregate disposable income, regardless of the size or reduction rates of the distributed benefits. Under a realistic distribution of earning capabilities, their aggregate disposable income can even decrease.

Suggested Citation

  • Illoong Kwon, 2024. "Income Assistance and Aggregate Disposable Income," Korean Economic Review, Korean Economic Association, vol. 40, pages 195-218.
    • Handle: RePEc:kea:keappr:ker-20240101-40-1-07
    as

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    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20240101-40-1-07.pdf
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    References listed on IDEAS

    as
    1. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    2. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1039-1073.
    3. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430, Elsevier.
    4. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
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    Keywords

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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