Regional Labor Supply Response to Negative Income Tax Programs.

by David H. Greenberg, James Hosek

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Estimates labor supply equations for husband-wife families in each region of the country, and uses these equations to simulate regional and national projected labor supply effects of negative income tax programs (NIT). Such programs would extend income maintenance to husband-wife families; reductions in labor supply are expected to be concentrated among these families. Even a generous NIT is unlikely to cause reductions in labor supply greater than 500,000 person-years per year for husbands and 100,000 person-years per year for wives. This represents earnings loss of $4 billion and a decrease in hours worked of less than 1 percent. Under a national NIT with identical standards in all regions, reductions in labor supply would be concentrated in the South. This reflects the geographic distribution of potential NIT participants. Nevertheless, no region would experience reduction greater than 1 percent. Thus the macroeconomic feedback effects of labor force withdrawal are expected to be negligible at the regional level. 122 pp. Bibliog.

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