Are There Treatment Duration Differences in the Seattle and Denver Income Maintenance Experiments?

This paper re-examines the labor supply responses in the Seattle and Denver Income Maintenance Experiments (SIME/DIME). Specifically, the original experimental results show a larger labor supply response for men and women from dual-headed households in the five-year treatment relative to those in the three-year treatment. Although typically thought of as a Negative Income Tax (NIT) Experiment, the SIME/DIME also included a job training experiment that enrolled roughly 60 percent of households, including both NIT treatment and control households. Once the assigned duration (three or five years) of the concurrent job training experiment is accounted for in the original empirical specification, the differences in NIT treatment response by program duration fall by over 50 percent in magnitude and become statistically insignificant. Since the original results of the SIME/DIME were inconsistent with the standard life-cycle labor supply model, the second part of the paper examines whether the revised results can be reconciled with a variant of this model. Specifically, the role of liquidity constraints in the labor supply responses is examined using self-reported information on access to capital markets. The support for the liquidity constrained interpretation is, at best, mixed and then only for one sub-sample of individuals. JEL Classification. I38, J22