The Labor Supply Response in the Gary Experiment

Abstract

The results of the Gary Negative Income Tax Experiment show significant work disincentives of 3 to 6 percent for husbands, 26 to 30 percent for female heads, but none for wives. The response of husbands is similar to those in other experiments. The response of female heads is somewhat larger than that in Seattle-Denver, the only other experiment reporting female-head results, because of a larger guarantee effect in Gary. The response of wives is very dissimilar to that in the other experiments, possibly because the Gary labor market offers few part-time possibilities for married women. In general, tax effects are much weaker than guarantee effects, which may also be a result of the steel-dominated, highly structured local labor market.