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Optimality of workfare with heterogeneous preferences


  • Katherine Cuff


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). JEL Classification: H21, H23 Optimalité du workfare en présence de préférences hétérogènes. L'auteur examine l'timalité du workfare en tant qu'instrument de tamisage à l'aide du cadre conceptuel traditionnel d'imposition non‐linéaire des revenus en présence de préférences hétérogènes. On postule que le workfare n'est pas un processus d'investissement en capital humain, que la participatioun est obligatoire, et que les coûts d'administration sont négligeables. Quand on postule aussi des utilités cardinales différentes pour les individus, il devient possible pour le gouvernement de redistribuer optimalement les revenus en faveur ou au détriment des individus pour qui le travail a une très grande désutilité. Dans l'un et l'autre cas, on montre que le workfare n'est jamais une politique optimale. On montre aussi que le workfare dans des activités non‐productives peut être un instrument de politique publique efficient, contrairement a ce qu'affirment Besley et Coate (1995), Brett (1998) et Beaudry et Blackorby (1997).

Suggested Citation

  • Katherine Cuff, 2000. "Optimality of workfare with heterogeneous preferences," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 149-174, February.
  • Handle: RePEc:wly:canjec:v:33:y:2000:i:1:p:149-174
    DOI: 10.1111/0008-4085.00010

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    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


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