The Desirability of Workfare in the Presence of Misreporting

Tomer Blumkin, Yoram Margalioth and Efraim Sadka

No 275760, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: In this paper we demonstrate that in addition to its acknowledged screening role, workfare - namely, introducing work (or training) requirements for welfare eligibility in means-tested programs - also serves to mitigate income misreporting by welfare claimants. It achieves this goal by effectively increasing the marginal cost of earning extra income in the shadow economy for claimants who satisfy the work requirement. We show that when misreporting is sufficiently prevalent, supplementing a means-tested transfer system with work requirements is socially desirable.

Keywords: Financial Economics; Labor and Human Capital (search for similar items in EconPapers)
Pages: 33
Date: 2011-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275760

DOI: 10.22004/ag.econ.275760

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