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Workforce or workfare? The optimal use of work requirements when labour is supplied along the extensive margin

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  • Craig Brett
  • Laurence Jacquet
Abstract
This paper explores the use of workfare as part of a tax mix when labour supply responses are along the extensive margin. In an economy where the government has a priori chosen any tax‐and‐benefit schedule, we show that, despite their common goal of providing additional incentives for individuals to enter the labour force, workfare and an earned income tax credit are at odds with each other. We also show that, in the presence of an optimal nonlinear income tax, introducing unproductive workfare is always suboptimal when individuals face the same disutility of being on workfare. When this disutility is heterogeneous, unproductive workfare may be a useful policy tool. Cet article étudie l'utilisation du workfare (programmes de travaux d'utilité publique) conjointement à la taxation des revenus du travail quand l'offre de travail est modélisée le long de la marge extensive (participation/non‐participation). Pour tout profil de taxes et de transferts, nous montrons qu'en dépit de leur objectif commun (fournir des incitations supplémentaires à entrer sur le marché du travail), les travaux d'utilité publique et le crédit d'impôt sur les revenus ne sont pas compatibles. Quand le profil de taxation non‐linéaire est à son optimum, nous montrons également qu'introduire des travaux d'utilité publique non productifs est toujours sous‐optimal si les individus présentent tous la même désutilité lorsqu'ils participent à ces travaux. En revanche, si leur désutilité est hétérogène, les travaux d'utilité publique non productifs peuvent constituer un outil de politique économique pertinent.

Suggested Citation

  • Craig Brett & Laurence Jacquet, 2015. "Workforce or workfare? The optimal use of work requirements when labour is supplied along the extensive margin," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(5), pages 1855-1882, December.
    • Handle: RePEc:wly:canjec:v:48:y:2015:i:5:p:1855-1882
    DOI: 10.1111/caje.12182
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    1. Alik-Lagrange, Arthur & Ravallion, Martin, 2018. "Workfare versus transfers in rural India," World Development, Elsevier, vol. 112(C), pages 244-258.
    2. Lohse Tim, 2014. "The Objections against Workfare Revised," Review of Economics, De Gruyter, vol. 65(1), pages 95-118, April.

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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