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Negative Taxes and Monetary Incentives to Work: The Static Theory

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  • Christopher Green

Abstract

The note examines how negative income taxation may influence incentives to work. The model indicating the income-leisure trade-off is used in both graphical and algebraic forms. The analysis indicates that if both income and leisure are "normal" goods, and if preference patterns are not changed as a result of implementation of a negative income tax plan, utility maximizing individuals will choose to work less in the presence of negative tax payments than in their absence. How much less depends on the level of the income guarantee, the negative (marginal) tax rate, and the shape of the utility function.

Suggested Citation

  • Christopher Green, 1968. "Negative Taxes and Monetary Incentives to Work: The Static Theory," Journal of Human Resources, University of Wisconsin Press, vol. 3(3), pages 280-288.
    • Handle: RePEc:uwp:jhriss:v:3:y:1968:i:3:p:280-288
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    Cited by:

    1. Liu, Xiao & Burge, Gregory S., 2024. "The effect of the new cooperative medical scheme on rural labor supply in China," China Economic Review, Elsevier, vol. 85(C).
    2. Paul D. Trampe, 2011. "The Effects of Combined Marginal Tax Rates on the Working Poor: Evidence from the Current Population Survey and the Survey of Income and Program Participation," Poverty & Public Policy, John Wiley & Sons, vol. 3(4), pages 1-31, December.
    3. Verena Löffler, 2021. "Questioning the feasibility and justice of basic income accounting for migration," Politics, Philosophy & Economics, , vol. 20(3), pages 273-314, August.
    4. David Allan Vardy, 1971. "Linear and Non-Linear Subsidies," Working Paper 39, Economics Department, Queen's University.

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