Abstract
We present a new fair allocation, coined a 'Pareto-efficient and Shared Resources Equivalent' allocation, which compensates for different productive skills, but not for different tastes for working. We illustrate the optimal second-best allocation in a discrete Stiglitz economy. The question of whether we should have regressive or progressive taxes for low earners crucially depends on whether the low-skilled have a strictly positive skill or zero skill. Our simulation results suggest that 'making work pay' policies can be optimal, according to our fairness criterion, but only in the unreasonable case in which all the unemployed are never willing to work.
| Original language | English |
|---|---|
| Pages (from-to) | 599-626 |
| Number of pages | 28 |
| Journal | Economica |
| Volume | 74 |
| Issue number | 296 |
| DOIs | |
| Publication status | Published - 2007 |
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Is it fair to 'make work pay'? / Luttens, Roland Iwan; Ooghe, Erwin.
In: Economica, Vol. 74, No. 296, 2007, p. 599-626.Research output: Contribution to Journal › Article › Academic › peer-review
TY - JOUR
T1 - Is it fair to 'make work pay'?
AU - Luttens, Roland Iwan
AU - Ooghe, Erwin
PY - 2007
Y1 - 2007
N2 - We present a new fair allocation, coined a 'Pareto-efficient and Shared Resources Equivalent' allocation, which compensates for different productive skills, but not for different tastes for working. We illustrate the optimal second-best allocation in a discrete Stiglitz economy. The question of whether we should have regressive or progressive taxes for low earners crucially depends on whether the low-skilled have a strictly positive skill or zero skill. Our simulation results suggest that 'making work pay' policies can be optimal, according to our fairness criterion, but only in the unreasonable case in which all the unemployed are never willing to work.
AB - We present a new fair allocation, coined a 'Pareto-efficient and Shared Resources Equivalent' allocation, which compensates for different productive skills, but not for different tastes for working. We illustrate the optimal second-best allocation in a discrete Stiglitz economy. The question of whether we should have regressive or progressive taxes for low earners crucially depends on whether the low-skilled have a strictly positive skill or zero skill. Our simulation results suggest that 'making work pay' policies can be optimal, according to our fairness criterion, but only in the unreasonable case in which all the unemployed are never willing to work.
UR - http://www.scopus.com/inward/record.url?scp=35348930561&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=35348930561&partnerID=8YFLogxK
U2 - 10.1111/j.1468-0335.2006.00566.x
DO - 10.1111/j.1468-0335.2006.00566.x
M3 - Article
VL - 74
SP - 599
EP - 626
JO - Economica
JF - Economica
SN - 0013-0427
IS - 296
ER -