The Labor-Supply Effects and Costs of Alternative Negative Income Tax Programs

Abstract

Results from the Seattle and Denver Income Maintenance Experiments are used to predict nationwide labor-supply effects and costs of six alternative negative income tax programs. To make the predictions, a labor-supply model parameterizing the experimental treatments is estimated using experimental data. The parameters of this model are introduced into a microsimulation model called Microanalysis of Transfers to Households (MATH). The simulations employ the March 1975 Current Population Survey (CPS), which is a weighted random sample of the U.S. population. The simulations are performed within a partial equilibrium framework under the assumption that the demand for low-income labor is perfectly elastic. The simulation results indicate that coverage, costs, and labor-supply effects of a national NIT program vary widely with the parameters of the program.