Economists have devoted considerable attention to the analysis of the advantages and disadvantages of the negative income tax (NIT) as a mechanism for income redistribution. Surprisingly little attention has been given to any significantly different alternative to the NIT most analyses simply compare one variant of the NIT to another. But recently several writers have suggested that a form of wage subsidy offers significant advantages over the NIT.1 This paper is an attempt to provide a more complete comparision of these two forms of transfer programs with an emphasis on the aggregate labor market consequences. Needless to say, no attempt is made to consider all repercussions of these policies. Instead, emphasis is focused on labor supply effects and related conditions for economic efficiency. Section I is an analysis of the effects of implementing a NIT when no other transfer programs are present. Section II is a similar analysis for a form of wage subsidy which will be referred to as the negative wage tax, or NWT. Section III uses the analysis of the preceding sections to provide a comparison of the NIT and NWT on two counts: their incidence and welfare cost.

The generally accepted goal of minimum wage laws is to alter the distribution of income in favor of low-income households. However, since a minimum wage will also disrupt low-wage labor markets, causing inefficiencies and imposing costs on some of the same workers the law is intended to help, an evaluation of the policy requires a weighing of the distributional benefits against the efficiency costs. Quantification of these benefits and costs is clearly important to this evaluation. While much effort has been devoted to estimating the employment effects of minimum wage laws, relatively little work has been done to estimate the distributional benefits. Our simulations focus on this efficiency-equity tradeoff by developing estimates of the impact of an increase in the minimum wage on the level and distribution of real income across households. Previous work has concluded that minimum wages are not as beneficial in their distributional impact as generally supposed.'