In this paper I simulate the entrance to the labor market in the presence of cultural barriers that constraint labor market participation of low-income workers. In this case, an optimal EITC depends on social planner’s relative preferences for persistently unemployed and working poor. I check EITC optimality in the short run under different types of social planners - from mild inequality averse to Rawlsian; and different kinds of policy makers – conservative, who favors the Working Poor, and liberal, who tolerates cultural barriers and favors the unemployed. Using simulations, I find that the imposition of an EITC is optimal in all cases, except for a Rawlsian and liberal policy-maker under the unusual case of full compliance to minimum wage. By calibrating the model for Israel, a country with well-documented cultural barriers for labor market participation, I find that the proposed framework will remain relevant in the foreseeable future. In light of these results and of EITC documented advantages, its scare use in developed economies remains an open question that merits further research.

中文翻译：

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存在劳动力市场参与文化障碍时的最优 EITC

在本文中，我模拟了在存在限制低收入工人参与劳动力市场的文化障碍的情况下进入劳动力市场的情况。在这种情况下，最佳 EITC 取决于社会计划者对持续失业和在职穷人的相对偏好。我在短期内检查了不同类型的社会计划者下的 EITC 最优性——从轻微的不平等厌恶到罗尔斯；以及不同类型的政策制定者——保守派，支持工作穷人，和自由派，容忍文化障碍并支持失业者。使用模拟，我发现 EITC 的实施在所有情况下都是最佳的，除了在完全遵守最低工资的不寻常情况下罗尔斯式和自由主义的政策制定者。通过校准以色列的模型，作为一个在劳动力市场参与方面存在充分记录的文化障碍的国家，我发现拟议的框架在可预见的未来仍然具有相关性。鉴于这些结果和 EITC 记录的优势，它在发达经济体中的恐慌使用仍然是一个值得进一步研究的悬而未决的问题。