Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses

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ID: 305138
2002
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Abstract
This paper analyzes optimal income transfers for low incomes. Labor supply responses are modeled along the intensive margin (intensity of work on the job) and along the extensive margin (participation into the labor force). When behavioral responses are concentrated along the intensive margin, the optimal transfer program is a classical Negative Income Tax program with a substantial guaranteed income support and a large phasing-out tax rate. However, when behavioral responses are concentrated along the extensive margin, the optimal transfer program is similar to the Earned Income Tax Credit with negative marginal tax rates at low income levels and a small guaranteed income. Carefully calibrated numerical simulations are provided.
Reference Key
openalex_W3121920701 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Emmanuel Saez
Journal the quarterly journal of economics
Year 2002
DOI
10.1162/003355302760193959
URL
https://doi.org/10.1162/003355302760193959
Keywords Keywords not found

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