Program Cost, Adequacy of Support, and Induced Labor Supply Reduction

Publisher: Mathematica Policy Research
Jan 30, 1978
Myles Maxfield and Katherine J. Siena

Key Findings:

  • Increasing the support level produced a more than proportional increase in the cost of the program, due to higher payments and larger numbers of eligible families.
  • Lowering the benefit reduction rate resulted in larger cost differences because it increased the number of participants more than increasing the support level did.
  • More generous NIT plans tended to also reduce work effort and labor supply more. 
Using microsimulation, the author estimates the trade-offs between the goal of raising the incomes of the poorest families, the goal of promoting the private employment of poor people, and the budgetary cost of replacing AFDC and Food Stamps with a universal negative income tax nationwide.