Working Paper

Workforce or Workfare?

Craig Brett, Laurence Jacquet
CESifo, Munich, 2011

CESifo Working Paper No. 3463

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.

CESifo Category
Public Finance
Keywords: extensive margin, optimal income taxation, workfare
JEL Classification: H210