Income Maintenance Experiments Research Articles

Health: A Source of Bias in Labor Supply Models

THE inconsistency the labor supply estimates using nonexperimental data has led to the costly income maintenance experiments that have taken place in various parts the country. In addition to being costly, the analyses experimental data also have their share econometric problems. 1 Both experimental and nonexperimental studies face the problems sample selection, model specification and variable measurement. In order to determine what effects the variables of interest have on labor supply, all relevant factors must be included. One these variables, namely health, is often included in a form which results in biased estimates. In this paper, we hope to show that the analysis experimental and nonexperimental labor supply data must carefully address the health variable problem before meaningful estimates can be obtained. In general, three treatments emerge in the literature: no control for health is used, a binary variable which we shall call a variable is included in the model as an exogenous variable, or the disability variable is used as a partitioning criterion to obtain a sample ,able-bodied men or women. The disability variable is often the response to the question, Does your health prevent you from working altogether? or Does your health limit the kind or amount work you could do? This study will examine the bias created by each these approaches and will suggest a method measurement for health which does not produce biased estimates.2 Health and Labor Supply

Income Maintenance Experiments, Politics, and the Perpetuation of Poverty

The background, general design and basic findings of a series of large-scale, government-sponsored, income maintenance experiments are described. Attention is given to the use of findings in connection with congressional debate over welfare reform. The findings have apparently fed political and ideological resistance to proposals for a national guaranteed income program for the poor. While we see the findings as bearing on the outcome of such a program, we suggest that much more important are largely unexamined systemic obstacles to a guaranteed income program.

Income Maintenance Experiments, Politics, and the Perpetuation of Poverty

Income Maintenance Experiments, Politics, and the Perpetuation of Poverty

A reinterpretation of the traditional income–leisure model, with application to in-kind subsidy programs

The traditional income–leisure model treats income as a composite commodity; it is not appropriate for studying commodity subsidies which alter relative prices within the composite. I suggest reinterpreting the traditional model as a special case of a utility function weakly separable with respect to leisure and all other commodities. This interpretation allows the work incentive effects of any subsidy program to be inferred from the terms of the program and data on the work effort effects of any other subsidy program, most notably income maintenance experiments. I illustrate the approach by estimating the work incentive effects of public housing. The model implies that even if special complementaries between leisure or work and the subsidized good are neglected, in-kind transfers will have different work incentive effects than equivalent cash transfers. In practice, in-kind transfers will generally stimulate work effort vis-à-vis equivalent cash grants.

THE EFFECT OF A NEGATIVE INCOME TAX ON RISK-TAKING IN THE LABOR MARKET

Theory argues that negative income taxes will increase the economic risks that workers take in the labor market. Data from the income maintenance experiments is analyzed to reveal that those workers subject to a NIT seemed to bear more risks than their control group counterparts. Implications and reservations about this finding are offered.

Accounting for Seasonality with Spline Functions

Truncated Normal, Econometrica 42 (Nov. 1974), 999-1011. Dagenais, Marcel, Application of a Threshold Regression Model to Household Purchases of Automobiles, this REVIEW 57 (Aug. 1975), 275-285. Goldfeld, Stephen, and Richard Quandt, Estimation in a Disequilibrium Model and the Value of Information, Journal of Econometrics 3 (1975), 325-348. Hausman, Jerry, and David Wise, Evaluation of Results from Truncated Samples: The New Jersey Income Maintenance Experiment, Annals of Economic and Measurement 5 (1976), 421-445. , Social Experimentation, Truncated Distributions, and Efficient Estimation, Econometrica 45 (May 1977), 919-938. Heckman, James, Shadow Prices, Market Wages, and Labor Supply, Econometrica 42 (July 1974), 679694. , Common Structure of Statistical Models of Truncation, Sample Selection, and Limited Dependent Variables and a Simple Estimator for Such Models, Annals of Economic and Measurement 5 (1976), 475-492. Keeley, Michael, Philip Robins, Robert Spiegelman, and Richard West, Labor Supply Effects and Costs of Alternative Negative Income Tax Programs, Journal of Human Resources 13 (Winter 1978), 3-36. Nelson, Forrest, Censored Regression Models with Unobserved, Stochastic Censoring Thresholds, Journal of Econometrics 6 (1977), 309-327. Rosen, Harvey, Taxes in a Labor Supply Model with Joint Wage-Hours Determination, Econometrica 44 (May 1976), 485-507. Rosett, Richard, and Forrest Nelson, Estimation of the Two-Limit Probit Regression Model, Econometrica 43 (Jan. 1975), 141-146. Shishko, Robert, and Bernard Rostker, Economics of Multiple Job Holding, American Economic Review 66 (June 1976), 298-308. Tobin, James, Estimation of Relationships for Limited Dependent Variables, Econometrica 26 (Jan. 1958), 24-36.

A Dynamic Model of Employment Behavior: An Application to the Seattle and Denver Income Maintenance Experiments

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The Effects of Negative Income Tax Programs on Marital Dissolution

We review the reasons for expecting a negative income tax (NIT) to affect marital dissolution rates and present a stochastic model of marital dissolution. The analysis reveals that the experimental NIT programs increased the martial dissolution rates for blacks and whites but not Chicanos. The differences in the magnitude of the responses by NIT guarantee level suggest that there are nonpecuniary differences between the experimental programs and existing income-support programs. We compare the Seattle and Denver Income Maintenance Experiments findings with the findings from the other income maintenance experiments and discuss implications for welfare reform.

Effects of SIME/DIME on Changes in Employment Status

Ways in which heads of families in the Seattle and Denver Income Maintenance Experiments reduce their labor supply are analyzed in this paper. By estimating transition rates of leaving and entering employment, the authors calculate the effect of the experiment on such measures as the average length of nonemployment, the likelihood of being employed at a given time, the number of entries into and exits from employment within a given period, and the average length of spells of employment. Results indicate that heads of families on experimental negative income tax (NIT) programs have a greater tendency than controls to leave employment. The results also indicate that the NIT programs substantially lengthen spells of nonemployment for all groups studied. All groups also experience a significant decline in the probability of employment as a result of the NIT treatments.

The Effect of Price and Income on Investment in Schooling

This paper investigates the impact of a negative income tax and a program of schooling subsidies on the demand for schooling of adult heads of families. A two-period model of labor supply is developed in which schooling is incorporated. An empirical version of the model is estimated using data from the first three years of the Seattle and Denver Income Maintenance Experiments. Strong effects of the schooling subsidies were found, but net effects of the negative income tax on schooling were not significant. The magnitude of the schooling subsidy effects implies a substantial positive social rate of return to schooling subsidies.

Program Participation and Labor-Supply Response

In this paper, a model of participation in the Seattle and Denver Income Maintenance Experiments (SIME/DIME) is developed and estimated. The model explains why a family chooses to receive negative income tax (NIT) payments, chooses to remain in the experiment but not receive payments, or chooses to leave the experiment (attrition). It is assumed that an individual selects the option that yields the greatest amount of utility. The empirical formulation of the model relates program participation to experimentally induced changes in wage rates, nonwage income, and disposable income, and several nonexperimental variables. Based on the participation results, a model of labor supply with varying participation rates is specified and estimated.

The Counseling and Training Subsidy Treatments

The Seattle and Denver Income Maintenance Experiments were the only negative income tax experiments to test the efficacy of counseling and training subsidies in limiting the expected program-induced reductions in work effort. The program had two components: free counseling services and a program of subsidies for the direct costs of education and training. Three levels of experimental treatment were used. All experimental subjects were eligible for free counseling, and some were also eligible for an educational subsidy at the rate of 50 or 100 percent of direct costs incurred. Participation in all aspects of the program were voluntary, and it varied with the characteristics of individuals as well as the particular treatment. The training subsidies did induce increased school attendance, and both counseling and training affected labor supply. However, no subsequent effects of increased human capital have been found. Definitive statements about the final effects of the program must await analysis of additional data, but the results presented here suggest that the treatments had at most an modest impact.

The Effects on the Labor Supply of Young Nonheads

This study examines the effects of the Seattle and Denver Income Maintenance Experiments (SIME/DIME) on the work effort of persons whose age is over 16 and under 21 at enrollment in the experiment and who are children, stepchildren, and grandchildren of heads of their families at enrollment. The results indicate that the experimental negative income tax (NIT) plans in SIME/DIME induce a reduction in work effort among non-heads. There is no evidence that the work-effort reduction is accompanied by an increase in school attendance. However, somewhat less than half the response appears to occur among persons who, in the absence of the experiment, would have worked while attending school, but attend school and do not work under the influence of the experiment.

The Effect of a Negative Income Tax on Migration

This paper presents an analysis of the impact of a negative income tax (NIT) program on the destination choices labor market behavior and experiences of migrants at their destination. Data from the Seattle and Denver Income Maintenance Experiments are used to provide estimates of these impacts. This theory unlike the more traditional human capital model postulates that migration is in part due to changes in the demand for location-specific environmental variables. It is assumed that there is a trade-off between the level of the environment and the real wage level and this defines an implicit shadow price of the environment. It is shown that an NIT program would change the demand for the environment leisure and market consumption because it affects their relative prices and income. Thus an NIT program should affect the rate of migration and types of destiantions chosen by migrants and should affect their labor market behavior at these destinations. One likely impact of a nationwide NIT program would be a redistribution of the lower income population to regions with better environments and lower wage rates.

Effects on Wage Rates: An Interim Analysis

Examined in this paper are the effects of the financial and manpower treatments of the Seattle and Denver Income Maintenance Experiments on the wage rates of original heads of families (husbands, wives, and single female heads). The results indicate that there is little basis for concluding that either the financial or manpower treatments have had any effect on wage rates. In addition to using a simple dummy variable model, we have examined the effects on manpower program participants and have investigated the possibility of a shift to higher-paying occupations. In the estimates of these models, significant response coefficients appear only about as often as would occur by chance alone.

Labor Supply Response Over Time

This study uses longitudinal data from the Seattle and Denver Income Maintenance Experiments to estimate a partial-adjustment model of labor-supply response. It is assumed that as a result of the experimental treatments, a person changes desired hours of work. The new desired hours of work are estimated empirically along with the speed at which the adjustment takes place. The results indicate that the financial treatments reduce desired hours of work by 9 percent for husbands, by 20 percent for wives, and by 25 percent for single female heads of families. The estimated time periods required for 90 percent adjustment are 2.4 years for husbands, 3.6 years for wives, and 4.5 years for single female heads. Tests are performed for differences in response by ethnicity, site, and experimental duration. The results indicate larger reductions in desired hours of work for blacks and Chicanos (relative to whites), for persons in Denver (relative to persons in Seattle), and for persons on the five-year programs (relative to persons on the three-year programs). Only in the case of husbands, however, are the ethnic, site, and duration differences statistically significant.

Data on income maintenance experiments

Data on income maintenance experiments

Book Reviews : Welfare in Rural Areas: The North Carolina-lowa Income Maintenance Experi ment. Edited by JOHN L. PALMER and JOSEPH A. PECHMAN. (Washington, D.C. The Brookings Institution, 1978. Pp. 273. $11.95; $4.95.)

Book Reviews : Welfare in Rural Areas: The North Carolina-lowa Income Maintenance Experi ment. Edited by JOHN L. PALMER and JOSEPH A. PECHMAN. (Washington, D.C. The Brookings Institution, 1978. Pp. 273. $11.95; $4.95.)

Policy Experimentation: Framing the Welfare Debate

The implications of the series of income maintenance experiments undertaken in the last decade are examined in terms of what this large scale research effort may have to contribute to welfare policy development. The experiments are viewed as a broad ranging enterprise concerned with a wide spectrum of welfare issues related to program objectives, design, implementation, and outcome. Major features of the policy debate are reviewed to identify points of entry for the products of the income maintenance research. The experiments are seen as contributing to an enhanced ability to develop welfare policy. Several contributions are identified and discussed including an empirically grounded frame of reference for analyzing and proposing policies, analytic modeling of the welfare system to explore the outcomes of alternative policies, and contributions to theory and practice for future capacity building.

Palmer, John L., and Joseph A. Pechman, eds. Welfare in Rural Areas: The North Carolina‐Iowa Income Maintenance Experiment. Washington, D.C.: The Brookings Institution, 1978, xiii + 273 pp., $@@‐@@11.95, $@@‐@@4.95 paper

American Journal of Agricultural EconomicsVolume 61, Issue 3 p. 588-589 Books Reviewed Palmer, John L., and Joseph A. Pechman, eds. Welfare in Rural Areas: The North Carolina-Iowa Income Maintenance Experiment. Washington, D.C.: The Brookings Institution, 1978, xiii + 273 pp., $@@-@@11.95, $@@-@@4.95 paper Harry W. Ayer, Harry W. Ayer Natural Resource Economics Division, ESCS, USDASearch for more papers by this author Harry W. Ayer, Harry W. Ayer Natural Resource Economics Division, ESCS, USDASearch for more papers by this author First published: 01 August 1979 https://doi.org/10.2307/1239462AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat No abstract is available for this article. Volume61, Issue3August 1979Pages 588-589 RelatedInformation