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Negative Income Tax and Family Labor Supply in Canada

  • John Baffoe-Bonnie

    (Penn State University)

Models of the labor supply of an individual family member's response to a Negative Income Tax (NIT) have often ignored family labor-supply interactions. This paper presents results indicating that, accounting for cross-substitution effects, an NIT has different impacts on the labor supply of family members. The female tends to reduce her labor supply at all levels of tax rate and guaranteed income, while the male increases his labor supply at certain program parameter levels. This seems to suggest that the work disincentive effect and the aggregate cost of an NIT may be less than has previously been thought for males. The empirical results also show that an NIT has different effects on the labor supply of family members working in different segments of the labor market, and that the measured effects are sensitive to choice of functional form.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume21/V21N2P197_213.pdf
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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 21 (1995)
Issue (Month): 2 (Spring)
Pages: 197-213

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Handle: RePEc:eej:eeconj:v:21:y:1995:i:2:p:197-213
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