Policy Research

A Comparison of the Labor Supply Findings from the Four Negative Income Tax Experiments

Philip K. Robins

Summary

This randomized experiment tests the effect of negative income tax rates. The focus of the experiment was determining changes in labor supply that were caused by negative income tax rates (which were being considered as an alternative to welfare payments). This study includes four separate experiments that came to similar results. On average, married men reduced working hours by roughly two weeks, women reduced working hours by three weeks, and youth by four weeks.

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Policy Implications

These results show a problem of the negative income tax plan that they may provide an incentive to cut back on work. This is especially true for women, whose substitution effect was more than double that of men (as a percentage of total hours worked).