Simultaneous Model of Marital Stability and Labor Supply Response to an NIT

摘要

This report presents simultaneous equation techniques to study the effect of a negative income tax on marital stability and labor supply response. The use of simultaneous equations permits an examination of both the direct and indirect effects of an NIT, and permits a more precise prediction of the costs of an NIT, which are a non-linear function of both marital status and labor supply. The analyses presented conclude that initial marital status should not be used to predict the current response of persons. Further, although changes in marital status per se appear to have little direct effect on labor supply response, the magnitude of response differs significantly between persons with changed and unchanged marital status at least for original husbands and wives. Finally, estimates of marital status change models suggest that labor supply response itself does not occur for the marital stability response.