Taxes, subsidies and unemployment: a unified optimization approach

Abstract

Like a linear programming (LP) problem, linear-fractional programming (LFP) problem can be usefully applied in a wide range of real-world applications. In the last few decades a lot of research papers and monographs were published throughout the world where authors (mainly mathematicians) investigated different theoretical and algorithmic aspects of LFP problems in various forms. In this paper we consider these two approaches to optimization (based on linear and linear-fractional objective functions on the same feasible set), compare results they lead to and give interpretation in terms of taxes, subsidies and manpower requirement. We show that in certain cases both approaches are closely connected with one another and may be fruitfully utilized simultaneously.