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... allows using a conventional Lagrangean approach without apology, since the familiar firstorder conditions are necessarily fulfilled at an optimum, irrespective of the problem’s convexity properties (=-=Bertsekas 1999-=-, proposition 3.1.1), and thus can be used to characterize the ÅzÆ Ç;È É Ê4Æ Ë"ÅzÌ Í!Ë É4Î Æ Ï È"Ð Ê(Ë"Ñ$ÅÓÒ"Ô Ï Æ Õ×Ö Î Ê4Ð7Ø Å Ô%Ë"Ï h for the resource constraint and the adjacent selfselection cons...

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...t zero fiscal cost as transfers are initially equal for the two groups. As a result, it is unambiguously welfare enhancing to provide a larger transfer to low income workers than to the unemployed.” (=-=Saez 1999-=-, p. 12). This is clearly wrong. Assume transfers to persons 0 and 1 are equal at the outset. Introducing a strictly negative marginal tax rate means offering person 1 an extra consumption, relative t...

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..., output and employment increase. This suggests that in evaluating such a reform measure one must carefully distinguish welfare effects on the one hand and output and employment effects on the other (=-=Browning, 1995-=-). Most empirical analyses of the EITC (like Hotz and Scholz, 2001) concentrate solely on the latter, which gives rise to a bias in favor of the EITC. Keynes once coined the famous phrase that one can...

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...loyed. As a11 consequence, workers have a lower marginal utility of consumption than nonworkers. This is obvious in the case of an additive utility function but also true if leisure is non-inferior (=-=Homburg 2002-=-, lemma 2). Hence, redistributing consumption from workers to nonworkers increases the social objective, and the government will do so as much as possible, equation (19) characterizing the state where...