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Workforce or Workfare? The Optimal Use of Work Requirements when Labor is Supplied along the Extensive Margin

Author

Listed:
  • Laurence Jacquet
  • Craig Brett

    (THEMA, Universite de Cergy-Pontoise
    Mount Allison University, 144 Main Street, Sackville NB, E4L 1A7, Canada)

Abstract

This paper explores the use of workfare as part of a tax mix when labor supply responses are along the extensive margin. In an economy where the government has a priori chosen any tax-and-bene?t schedule, we show that, despite their common goal of providing additional incentives for individuals to enter the labor force, workfare and an earned income tax credit are at odds with each other. In the presence of an optimal nonlinear income tax, we also show that introducing unproductive workfare is always suboptimal when individuals face the same disutility of being on workfare. In contrast, when this disutility is heterogeneous, unproductive workfare may be a useful policy tool. We also provide a su¢ cient condition for productive workfare to be optimal.

Suggested Citation

  • Laurence Jacquet & Craig Brett, 2012. "Workforce or Workfare? The Optimal Use of Work Requirements when Labor is Supplied along the Extensive Margin," Thema Working Papers 2012-40, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    • Handle: RePEc:ema:worpap:2012-40
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    References listed on IDEAS

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    2. Alik-Lagrange, Arthur & Ravallion, Martin, 2018. "Workfare versus transfers in rural India," World Development, Elsevier, vol. 112(C), pages 244-258.

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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