A Model of the Marginal Labor Supply Response to Transfer Programs, with a Historical Illustration

Robert Moffitt and Matthew V. Zahn

No 26028, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We extend the textbook model of the labor supply response to a transfer program to incorporate responses of those on the margin of participation, which we term the marginal labor supply response. Government policies which alter program participation can have effects on the labor supply of those on the margin which differ from those of inframarginal individuals. The model shows theoretically that the marginal labor supply responses can grow, decline, or remain the same as participation expands and hence are ambiguous in sign. We provide a historical illustration, estimating marginal labor supply responses of single mothers in the 1980s AFDC program, the last program to assume the textbook form of a cash transfer program. The empirical results show a non-monotonic, U-shaped marginal response curve, with marginal labor supply responses small at low participation rates, growing in magnitude as the program expands, but then falling again as participation expands further. The pattern can be explained by changing movements between full-time work, part-time work, and nonwork in response to program expansion. Marginal labor supply responses are quite modest, on average, consistent with the literature, but are larger in certain ranges of participation.

JEL-codes: C21 I3 J2 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-his, nep-lma, nep-ltv and nep-ore
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w26028.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26028

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26028

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().