Richard W. West

The Labor-Supply Effects and Costs of Alternative Negative Income Tax Programs

Results from the Seattle and Denver Income Maintenance Experiments are used to predict nationwide labor-supply effects and costs of six alternative negative income tax programs. To make the predictions, a labor-supply model parameterizing the experimental treatments is estimated using experimental data. The parameters of this model are introduced into a microsimulation model called Microanalysis of Transfers to Households (MATH). The simulations employ the March 1975 Current Population Survey (CPS), which is a weighted random sample of the U.S. population. The simulations are performed within a partial equilibrium framework under the assumption that the demand for low-income labor is perfectly elastic. The simulation results indicate that coverage, costs, and labor-supply effects of a national NIT program vary widely with the parameters of the program.

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.

An Evaluation of the Impact of ES Referrals on Applicant Earnings

The impact of the labor exchange activities of the United States Employment Service (ES) on job seekers is analyzed in this paper. We compare the labor market experiences following application to the ES of individuals who receive ES job referrals with the experiences of those who do not receive referrals. Extensive evidence is presented indicating that the not-referred group is a reliable comparison group for estimating the impact of ES referrals on applicant labor market experiences. Our impact estimates indicate that there are significant and sizable effects of a job referral for women, resulting in increased earnings and reduced length of time to reemployment. The impacts of a job referral for men, however, are not significantly different from zero.

An Analysis of the Sensitivity of Quasi-Experimental Net Impact Estimates of CETA Programs.

This article examines the sensitivity of CETA net impact estimates to alternative methodological procedures to reconcile the diverse findings from various CETA studies that are based on the same basic data sets. Our results indicate that estimated net impacts are quite sensitive to whether individuals without recent labor market attachment are included in the comparison group and to how close to the date of enrollment one measures preprogram earnings. Also, impact estimates are quite sensitive to the choice of the estimation models used and to assumptions about the period in which the decision to enroll in CETA is made. However, net impact estimates are robust to the matching technique used. Our results indicate that the wide diversity of CETA net impact estimates reported in the literature can be explained by differences in the methodological procedures used.

Sample Attrition and Labor Supply Response in Experimental Panel Data: A Study of Alternative Correction Procedures

Sample attrition is a potentially serious problem for analysis of panel data, particularly experimental panel data. In this article, a variety of estimation procedures are used to assess the importance of attrition bias in labor supply response to the Seattle and Denver Income Maintenance Experiments (SIME/DIME). Data from Social Security Administration earnings records and the SIME/DIME public use file are used to test various hypotheses concerning attrition bias. The study differs from previous research in that data on both attriters and nonattriters are used to estimate the experimental labor supply response. Although not conclusive, the analysis suggests that attrition bias is probably not a serious enough problem in the SIME/DIME data to warrant extensive correction procedures. The methodology used in this study could be applied to other panel data sets.

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.

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.

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.