Optimal Participation Income and Negative Income Tax in poverty Alleviation Programs

Abstract

We compare two different redistributive policies specifically designed to alleviate poverty. The first one is inspired to the idea of participation income, the second focused on the introduction of a negative income tax. Briefly characterizing an economy with workers and non-workers and using income as evaluation space for poverty, we determine optimality conditions of both measures under a flat rate labor income tax. Finally, we emphasize a necessary condition for these measures to mitigate poverty.