The Design Of Income Maintenance Programs
This paper provides a comprehensive treatment of a basic income maintenance problem. It stresses the impact that imperfect information has on program design. First, the authors are able to unify the theoretical literature on the income maintenance problem. Second, they examine the impact of allowing the government to impose workfare on recipients of income support. The solution is strikingly simple. It separates the poor into two categories, with the lower income groups subject to workfare while facing a 100 percent marginal tax rate on earnings. The second group does no public work and is offered a benefit schedule that taxes earnings at a lower rate. Copyright 1995 by The Review of Economic Studies Limited.
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