Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses

A paper studying the best way to design income transfer programs - like basic income, or the earned income tax credit - given various behavioral responses at the "intensive" and "extensive" margins. When behavior changes most at the intensive margin (how hard people work), the optimal progran is a negative income tax with a substantial guaranteed income. But when behavior changes most at the extensive margin (whether people work), earned income credits are better.

2000

Academic Paper

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