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Optimality Of Workfare With Heterogeneous Preferences

Author

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  • Katherine Cuff

    (McMaster University)

Abstract

Using the standard nonlinear income taxation framework with heterogeneity of preferences, this paper examines the optimality of workfare as a screening tool. It is assumed that workfare does not serve as a human capital investment, participation is mandatory, and administrative costs are negligible. Imposing alternative cardinalizations on individuals utilities, allows for the possibility that the government optimally redistributes income to or from high disutility of labour individuals. Under either case, workfare is never optimal to impose on these individuals. It is also shown that non-productive workfare can be an efficient policy tool, in contrast to the results found in Besley and Coate (1995), Brett (1997), and Beaudry and Blackorby (1997).

Suggested Citation

  • Katherine Cuff, 1998. "Optimality Of Workfare With Heterogeneous Preferences," Working Paper 968, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:968
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_968.pdf
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    Keywords

    Nonlinear income taxation; Workfare;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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