Optimal Income Transfers
36 Pages Posted: 31 Jul 2006
There are 2 versions of this paper
Optimal Income Transfers
Optimal Income Transfers
Date Written: June 2006
Abstract
A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.
JEL Classification: H21, H53, I38
Suggested Citation: Suggested Citation
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