If transfer payments are related to characteristics of households like income, then an increase in the marginal tax on labour income, _w,:

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An increase in the marginal tax on labour income will decrease the net income of households and potentially reduce their ability to purchase goods and services. This decrease in demand may lead to a decrease in prices and wages in the market. Since transfer payments are related to household characteristics like income, households with lower income may receive more transfer payments. Therefore, a decrease in demand from households with higher income may have a stronger effect on the market than an increase in transfer payments for households with lower income. As a result, an increase in the marginal tax on labour income is likely to have stronger effects in the market clearing model.

If Transfer Payments Are Related to Characteristics of Households Like