The Effects of the New Jersey-Pennsylvania Negative Income Tax Experiment on Health and Health Care Utilization

Abstract

This paper examines the effects of the recently completed New Jersey-Pennsylvania Negative Income Tax Experiment on health and health care utilization. Both economic and sociological theory suggest that the negative tax benefits may, in the short run, increase the proportions reporting themselves in ill health and utilizing care, and, in the long run, reduce these figures. However, the empirical literature suggests the effects may be modest, vary by family members, and be swamped by other variables. Data are presented for two or three points in time (depending on the family member) over the three year duration of the experiments and no effects of any kind are observed. The results give credence to suggestions that health and health care utilization may be more a function of life style or preferences than income. While neither economic nor sociological theory asserts the effects of income are simple, these data suggest its theoretical role is still not well understood. This paper examines the effects of the recently completed New JerseyPennsylvania Negative Income Tax Experiment on health and health care utilization.1 The issue is an important one for two reasons. First, for those family members who are potential or active laborforce participants, the experimental benefits, by lowering the costs of not working and increasing the funds available for health care, may lead individuals to acknowledge health conditions that their need to earn had previously caused them to ignore. Second, the experimental payments may make possible expenditures for health which improve the ability to work or to engage in other, nonwork activities. Thus, the experiment's effects on health and the utilization of health care may have an important bearing on the assessment of the costs and benefits of a negative income tax program. The conditions under which these