change, and with it the simple statement of Proposition 2, if work itself is seen as a
social good, as in Moffit (2006). It is also clear how to modify Proposition 2 to account
for productive workfare. In a model with intensive labor supply choice, Brett (1998)
shows that workfare for the out-of-work is optimal if and only if the marginal product
of the required activity is sufficient to compensate for the marginal disutility of work
for program participants. Along the extensive margin and in the presence of an EITC,
workfare is optimal if and only if its output is enough to compensate for the disutility of
work of program participants and cover the increases in the EITC.
3 Extensions
The model of the previous section is based on the assumption that the intensity of
workfare, in terms of utility, is identical for everyone. This is, admittedly, an extreme
simplification. In this section, we propose two alternative specifications of the intensity
of workfare. The first alternatives posits a third dimension of heterogeneity among in-
dividuals, namely in how they experience workfare. We show that this alternative is of
no consequence to our qualitative results. The second alternative allows the disutility of
workfare to be a deterministic function of the parameters m and n, so that, for example
the distaste for workfare might varies systematically with the distaste for work. In this
variant, it is possible (but not necessary) that workfare might actually reduce participa-
tion in the workforce. If this turns out to be the case, workfare and an earned income
tax credit can coexist because, due to falling participation, the introduction of workfare
saves on the EITC.
3.1 Three-Dimensional Heterogeneity Among Individuals
Just as individuals may differ in their costs of market work, they might also differ in
their distaste for publicly-required work. To account for this possibility, we re-interpret
the workfare variable r as an objective measure of required work (for example, its du-
ration). We then posit a preference parameter k that measures the intensity of distaste