Earnings and Underreporting Responses to Negative Income Tax Plans: Evidence from the Seattle and Denver Income Maintenance Experiments

摘要

The objective of this study is to partition into two components budgetary costs added to transfer programs by behaviorally induced changes in reported earnings as follows: (1) costs resulting from 'true' reductions in earnings that occur because of adjustments in working hours; (2) costs resulting as a consequence of underreporting earnings. The strategy is to obtain two alternative sets of labor supply parameters, one based on SIME/DIME interview data and a second based on employer-reported information to the Washington and Colorado State Departments of Employment Security. These parameters are then used in a microsimulation model to predict the costs and impact on earnings of several prototype NIT plans. The results when using the self-reported interview data should reflect the combined influence of both 'true' and 'pseudo' labor supply responses, while those based on parameters estimated with employer-reported DES information should only incorporate genuine responses.