Premium
Workforce or workfare? The optimal use of work requirements when labour is supplied along the extensive margin
Author(s) -
Brett Craig,
Jacquet Laurence
Publication year - 2015
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12182
Subject(s) - workfare , earned income tax credit , incentive , margin (machine learning) , economics , labour economics , work (physics) , labour supply , workforce , government (linguistics) , tax credit , public economics , welfare , microeconomics , market economy , economic growth , engineering , computer science , mechanical engineering , linguistics , philosophy , machine learning
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.