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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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File URL: http://www.u-cergy.fr/thema/repec/2013-01.pdf
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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
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Handle: RePEc:ema:worpap:2013-01
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  3. 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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  11. Ted O'Donoghue & Matthew Rabin, 2003. "Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes," American Economic Review, American Economic Association, vol. 93(2), pages 186-191, May.
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  13. Besley, Timothy & Coate, Stephen, 1992. "Understanding welfare stigma: Taxpayer resentment and statistical discrimination," Journal of Public Economics, Elsevier, vol. 48(2), pages 165-183, July.
  14. Laurence Jacquet & Bruno Van der Linden, 2006. "The Normative Analysis of Tagging Revisited: Dealing with Stigmatization," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 168-198, June.
  15. Bound, John & Waidmann, Timothy, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1393-419, November.
  16. PESTIEAU, Pierre & RACIONERO, Maria, 2007. "Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives," CORE Discussion Papers 2007035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Sheshinski, E. & Diamond, P., 1992. "Economic Aspects of Optimal Disability Benefits," Working papers 92-5, Massachusetts Institute of Technology (MIT), Department of Economics.
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  22. Parsons, Donald O., 1996. "Imperfect 'tagging' in social insurance programs," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 183-207, October.
  23. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  24. 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.
  25. Jean-Marie Lozachmeur, 2006. "Disability insurance and optimal income taxation," International Tax and Public Finance, Springer, vol. 13(6), pages 717-732, November.
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  28. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-34, February.
  29. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
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