Changes in Household Size and Composition due to Financial Incentives
Tax and transfer programs inevitably create incentives relating to the size and composition of households. Examples of such incentives are the "marriage penalty," dependents exemptions, and the eligibility rules for categorical welfare programs. This paper notes that changes in transfer program parameters may encourage recipient households to "import" nonwage-earning individuals, especially children, and to "export" wage earners. Several hypotheses regarding the nature of such responses are derived and supporting evidence is obtained using data from three experimental income-maintenance programs.
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