Must a Negative Income Tax Reduce Labor Supply? A Study of the Family's Allocation of Time
Models of the labor supply behavior of single persons predict that a negative income tax (NIT) will always reduce the labor supply and earnings of such persons. I consider three models of family labor supply; and find that in all three, a NIT might raise a given family member's labor supply and might also raise total family labor supply: in one, a NIT could even raise total family earnings. These models and recent empirical estimates (showing positive NIT effects on some family membersâ€™ labor amply and on some familiesâ€™ earnings) suggest that the work disincentive effects and the cost of a NIT may be less than has previously been thought.
|Date of creation:||Oct 1975|
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