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Tagging and Redistributive Taxation with Imperfect Disability Monitoring

  • Laurence jacquet


    (THEMA, Universite de Cergy-Pontoise and THEMA)

This paper studies the optimal income redistribution and optimal monitoring when disabil- ity bene?ts are intended for disabled people but some of the disabled do not claim disability bene?ts and enter the labor force. Classi?cation errors also occur. Some able applicants with high distaste for work are falsely granted disability bene?ts (type II errors) and some disabled applicants are denied disability bene?ts (type I errors). The accuracy of monitoring depends on the resources devoted to it. Labor supply responses are at the extensive margin. The paper derives the optimal income tax-transfer schedule that incorporates welfare and disability ben- e?ts and takes into account monitoring costs. The cost of monitoring and the co-existence of welfare and disability bene?ts play in favor of Earned Income Tax Credits for disabled workers who forgo disability bene?ts as well as for disabled workers who forgo welfare assistance.

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Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2013-01.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ema:worpap:2013-01
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  6. MARCHAND, Maurice & PESTIEAU, Pierre & DEL MAR RACIONERO, Maria, 2003. "Optimal redistribution when different workers are indistinguishable," CORE Discussion Papers 2003018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  9. Henrik Jacobsen Kleven & Wojciech Kopczuk, 2008. "Transfer Program Complexity and the Take Up of Social Benefits," NBER Working Papers 14301, National Bureau of Economic Research, Inc.
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  11. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Disability Testing and Retirement," IDEI Working Papers 281, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Boadway, Robin & Marceau, Nicolas & Sato, Motohiro, 1999. "Agency and the design of welfare systems," Journal of Public Economics, Elsevier, vol. 73(1), pages 1-30, July.
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  18. Schokkaert, Erik & Van de gaer, Dirk & Vandenbroucke, Frank & Luttens, Roland Iwan, 2004. "Responsibility sensitive egalitarianism and optimal linear income taxation," Mathematical Social Sciences, Elsevier, vol. 48(2), pages 151-182, September.
  19. Robin Boadway & Katherine Cuff, 1999. "Monitoring Job Search as an Instrument For Targeting Transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 317-337, August.
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  26. Laurence Jacquet, 2010. "Take it or Leave it: Take-up, Optimal Transfer Programs, and Monitoring," CESifo Working Paper Series 3018, CESifo Group Munich.
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