Income: A Survey of Experiment~~ Evidence

Presidents and policy analysts are periodically seized with a passion to reform the nation’s welfare system. This passion occasionally results in a serious proposal for thorough reform, such as President Nixon’s Family Assistance Plan, President Carter’s Program for Better Jobs and Income, or President Reagan’s New Federalism. The only reform proposal that has received experimental scrutiny, however, is a suggestion advanced by academic economists--the negative income tax or guaranteed annual income plan. While popular among economists, the negative income tax proposal has never attracted much enthusiasm--or even attention--among politicians and voters. Fortunately, the findings from the negative income tax experiments are relevant to a wide variety of reform proposals, including the plans suggested by recent Presidents. Experimental results were used, in fact, to predict the behavioral consequences of both the Nixon and the Carter reform proposals. This essay summarizes the labor supply findings from the four negative income tax experiments and considers their implications for reforming the American welfare system. It is useful at the start to distinguish among three different kinds of labor supply estimates that have been produced by the experiments. The first was obtained by measuring the simple difference between the work effort of people who were assigned to experimental negative income tax plans and that of people who were assigned to the control group. Those in the control group were not eligible to receive payments