An Ex-Ante Evaluation of Labor Supply Effects: A Case of Negative Income Tax Policy in Thailand
Keywords:
poverty, income inequality, social welfare, negative income tax, ex-ante evaluationAbstract
This study aims to ex-ante evaluate the effects of a negative income tax initiative, proposed by the Fiscal Policy Office, on Thai labor participation and labor supply. There are two expected outcomes: cash transfers will attract those who aim to join the labor force, but the currently employed may be demotivated by the policy. A Socio-economic Survey and Labor Force Survey of 2013 are jointly applied with a truncated normal hurdle regression to estimate both effects. The estimation reveals that both effects are significant: a one-percent increase in expected wage income leads to a 1.33-percent increase in labor participation probability for single workers and a 0.41-percent increase for married workers. On the other hand, a 100-baht wage increase is estimated to result in a reduction in working hours of 1.08 for each employed worker. Overall, measured net economic loss outweighs total gains, but both values are trivial, which might not be a serious issue if the program is actually implemented. The income-distribution effect of the policy is also tiny, reducing the household income Gini coefficient by 0.005 points.
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