Workforce or Workfare?

CESifo Working Paper No. 3463

Workforce or Workfare?

Abstract

This article explores the use of workfare as part of an optimal tax mix when labor supply
responses are along the extensive margin. Particular attention is paid to the interaction
between workfare and an earned income tax credit, two policies that are designed to provide
additional incentives for individuals to enter the labor force. This article shows that, despite
their common goal, these policies are often at odds with each other.

JEL-Code: H210.

Keywords: extensive margin, optimal income taxation, workfare.

Laurence Jacquet
Norwegian School of Economics and
Business Administration
Helleveien 30

5045 Bergen

Norway

[email protected]

April 13, 2011

Craig Brett's research was generously supported by the Canada Research Chairs Program.

Errors, omissions and views are entirely our own.

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