IESET.
Hypotheses·labour·friedman_negative_income_tax_labour_supply_smaller_than_predicted

The labour-supply dis-employment elasticity of negative-income-tax (NIT) and earned-income-tax-credit (EITC) -style cash-transfer programmes is materially smaller than the canonical mid-1970s NIT- experiment headline estimates suggested.

Across the four US NIT experiments (New Jersey, Rural NIT, Seattle-Denver SIME-DIME, Gary) the male-head-of-household labour-supply reduction averaged 5-8%, not the 20%+ that conservative critics warned about; and the post- 1986 EITC expansion produced positive (not negative) labour-supply effects on single mothers in the +5 to +10 percentage-point range. The hypothesis is the Chicago / Friedman 1962 prediction that a well-designed cash transfer integrated with the tax system reduces marginal effective tax rates on work and produces smaller dis- employment than means-tested categorical welfare.

PARTIALengine/runs/friedman_negative_income_tax_labour_supply_smaller_than_predicted

PARTIAL — ATT=+20.8, p=nan, N=53, treated_countries=1 (above α=0.10)

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The evidence is suggestive but not decisive. ATT=+20.8, p=nan, N=53, treated_countries=1 (above α=0.10)

why it matters

Labor-market rules often help some workers while risking job loss or slower hiring for others. This test looks for that tradeoff in observable employment or unemployment data.

how the test works

It compares 1 country or place units from 1968 to 2020, using a did callaway santanna design, with fixed effects for individual and year and state.

what was measured
What changed
  • Nit experimental assignment
  • Eitc max credit real
What we checked
  • Weekly labour hours male head
  • Labour force participation single mothers
  • Annual earnings low skill
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/friedman_negative_income_tax_labour_supply_smaller_than_predicted
1007550250196819942020USA
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show weekly_labour_hours_male_head across 1 sampled countries over 1968–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for friedman_negative_income_tax_labour_supply_smaller_than_predicted. Published chart will be generated from engine/runs/friedman_negative_income_tax_labour_supply_smaller_than_predicted/chart_data.json.

Pre-registration

registration ordering unverified
first-spec commit 4c8ce8e · 2026-07-18T22:11:21Z
run generated · 2026-04-30T11:47:57Z
Run timestamp predates this path's first git-add commit (rebase, rename, or pre-git local run). Spec hash is still the path's first-add commit — not repository HEAD — but ordering is not a clean pre-registration proof.

The labour-supply dis-employment elasticity of negative-income-tax (NIT) and earned-income-tax-credit (EITC) -style cash-transfer programmes is materially smaller than the canonical mid-1970s NIT- experiment headline estimates suggested. Across the four US NIT experiments (New Jersey, Rural NIT, Seattle-Denver SIME-DIME, Gary) the male-head-of-household labour-supply reduction averaged 5-8%, not the 20%+ that conservative critics warned about; and the post- 1986 EITC expansion produced positive (not negative) labour-supply effects on single mothers in the +5 to +10 percentage-point range. The hypothesis is the Chicago / Friedman 1962 prediction that a well-designed cash transfer integrated with the tax system reduces marginal effective tax rates on work and produces smaller dis- employment than means-tested categorical welfare.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the NIT-experiment male-head hours reduction exceeds 15% (the rough threshold separating Friedman's "manageable" prediction from the conservative-critic prediction), OR (b) the EITC-induced single-mother LFPR effect is negative or below +3pp at p<0.05, OR (c) the bundled labour-supply elasticity to the after-tax wage exceeds 0.5 in the bottom-tercile education sample. A welfare-trap critique of NIT/EITC wins cleanly if the male-head hours reduction exceeds 20% AND the EITC LFPR effect on single mothers is below +3pp.

formal test & threshold
test:      nit_experiment_hours_and_eitc_did_lfpr
threshold: NIT_male_head_hours_reduction <= 15% across all four experiments AND EITC_single_mother_lfpr_effect >= +5pp at p<0.05 AND bundled_labour_supply_elasticity <= 0.4 AND post-PRWORA confound robustness: result holds when 1996-2000 dropped from EITC sample

Method

Template
did_callaway_santanna
Fixed effects
individual, year, state
Clustering
state
Sample
1 countries · 1968 – 2020
Evidence type
causal

Two-strategy design: (A) NIT experiment treatment-control comparisons using SIME-DIME / NJ microdata with intent-to-treat hours estimates; (B) Eissa-Liebman 1996 / Meyer-Rosenbaum 2001 style DiD on EITC expansions using CPS ASEC and the kink-and-kink-jumps in marginal EITC schedules as quasi-experimental variation. Effects pooled across both strategies for the headline test. Callaway-Sant'Anna DiD on EITC expansions to handle staggered state-level supplements.

Data

VariableSourceTransform
weekly_labour_hours_male_head
outcome
academic:nit_experiments_microdatatier 4
level_hours_per_week
labour_force_participation_single_mothers
outcome
fred:LNS11300002tier 1
level_pp
annual_earnings_low_skill
outcome
bls:CPS_ASEC_microdatatier 1
log_real_2020
nit_experimental_assignment
treatment
academic:nit_experiments_microdatatier 4
indicator_treatment_assignment
eitc_max_credit_real
treatment
derived:eitc_max_credit_realtier 4
log_usd_2020
federal_minimum_wage_real
treatment
fred:STTMINWGCAtier 1
log_real_2020
state_unemployment_rate
control
bls:LAUST010000000000003tier 1
level
state_gdp_per_capita
control
fred:GDPPC_state_paneltier 1
log
prwora_implementation
control
derived:tanf_state_adoption_datestier 4
indicator

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — friedman_negative_income_tax_labour_supply_smaller_than_predicted

Verdict: PARTIAL — ATT=+20.8, p=nan, N=53, treated_countries=1 (above α=0.10)

Pre-registration

  • Claim: The labour-supply dis-employment elasticity of negative-income-tax (NIT) and earned-income-tax-credit (EITC) -style cash-transfer programmes is materially smaller than the canonical mid-1970s NIT- experiment headline estimates suggested. Across the four US NIT experiments (New Jersey, Rural NIT, Seattle-Denver SIME-DIME, Gary) the male-head-of-household labour-supply reduction averaged 5-8%, not the 20%+ that conservative critics warned about; and the post- 1986 EITC expansion produced positive (not negative) labour-supply effects on single mothers in the +5 to +10 percentage-point range. The hypothesis is the Chicago / Friedman 1962 prediction that a well-designed cash transfer integrated with the tax system reduces marginal effective tax rates on work and produces smaller dis- employment than means-tested categorical welfare.
  • Falsification rule: Not supported if (a) the NIT-experiment male-head hours reduction exceeds 15% (the rough threshold separating Friedman's "manageable" prediction from the conservative-critic prediction), OR (b) the EITC-induced single-mother LFPR effect is negative or below +3pp at p<0.05, OR (c) the bundled labour-supply elasticity to the after-tax wage exceeds 0.5 in the bottom-tercile education sample. A welfare-trap critique of NIT/EITC wins cleanly if the male-head hours reduction exceeds 20% AND the EITC LFPR effect on single mothers is below +3pp.

Estimate (Callaway-Sant'Anna staggered DiD, TWFE approximation)

  • coefficient: 20.80416666666661
  • std_error: nan
  • p_value: nan
  • n_obs: 53
  • n_countries: 1
  • r_squared_within: 1.0
  • fe_entity: True
  • fe_time: True
  • cluster: country
  • method: Callaway-Sant'Anna TWFE fallback (linearmodels failed: No module named 'linearmodels')
  • n_treated_countries: 1
  • cohort_years: [1968]
  • dropped_controls_due_to_overlap: []

Variables resolved

  • fred:LNS11300002 → labour_force_participation_single_mothers (outcome, n=79)
  • fred:STTMINWGCA → federal_minimum_wage_real (treatment, n=59)

Missing data

  • academic:nit_experiments_microdata (outcome)
  • bls:CPS_ASEC_microdata (outcome)
  • academic:nit_experiments_microdata (treatment)
  • derived:eitc_max_credit_real (treatment)
  • bls:LAUST010000000000003 (controls)
  • fred:GDPPC_state_panel (controls)
  • derived:tanf_state_adoption_dates (controls)

Generated by scripts/run_did_callaway_santanna.py at 2026-04-30T11:47:57+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Hum-Simpson (1993) meta of NIT experiments, Eissa-Liebman (1996 QJE) on EITC and single-mother labour supply, Meyer-Rosenbaum (2001 QJE) on EITC and welfare reform, Hoynes-Patel (2018) on long-run EITC effects are the canonical references. The 1968-1980 NIT experiments remain the only large-N RCTs on cash-transfer labour-supply effects in advanced economies until the 2010s UBI experiments (Finland, Stockton CA), which are too recent for inclusion in this spec.

Authored framework. Read the transparency note.