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Tagging and redistributive taxation with imperfect disability monitoring

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  • Laurence Jacquet

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

This paper studies the optimal income redistribution and optimal monitoring when disability benefits are intended for disabled people but some of the disabled do not claim disability benefits and enter the labor force. Classification errors also occur. Some able applicants with high distaste for work are falsely granted disability benefits (type II errors) and some disabled applicants are denied disability benefits (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 benefits and takes into account monitoring costs. The cost of monitoring and the co-existence of welfare and disability benefits play in favor of Earned Income Tax Credits for disabled workers who forgo disability benefits as well as for disabled workers who forgo welfare assistance. Copyright Springer-Verlag Berlin Heidelberg 2014
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Laurence Jacquet, 2014. "Tagging and redistributive taxation with imperfect disability monitoring," Post-Print hal-02979716, HAL.
    • Handle: RePEc:hal:journl:hal-02979716
    DOI: 10.1007/s00355-013-0738-y
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    Cited by:

    1. Sean Slack & David Ulph, 2014. "Optimal Universal and Categorical Benefits with Classification Errors and Imperfect Enforcement," Discussion Paper Series, School of Economics and Finance 201411, School of Economics and Finance, University of St Andrews.
    2. Geir H. M. Bjertnæs, 2020. "The marginal (opportunity) cost of public funds," Discussion Papers 925, Statistics Norway, Research Department.
    3. Zoutman, Floris T. & Jacobs, Bas, 2016. "Optimal redistribution and monitoring of labor supply," Journal of Public Economics, Elsevier, vol. 135(C), pages 15-31.
    4. Slack, Sean & Ulph, David, 2014. "Optimal Universal and Categorical Benefits with Classification Errors and Imperfect Enforcement," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-13, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Geir H. M. Bjertnæs, 2018. "The marginal cost of public funds in large welfare state countries," Discussion Papers 879, Statistics Norway, Research Department.
    6. Geir Bjertnaes, 2015. "Social Security Transfers and the Marginal Cost of Public Funds," CESifo Working Paper Series 5689, CESifo.
    7. Slack, Sean & Ulph, David, 2014. "Optimal Universal and Categorical Benefits with Classification Errors and Imperfect Enforcement," SIRE Discussion Papers 2015-13, Scottish Institute for Research in Economics (SIRE).

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