Which of the following would be the most useful source of time series variation with which to identify the effect of income guarantees on labor supply?
A) an abrupt increase in the income guarantee over a short time
B) a steady increase in the income guarantee over a long time
C) no change in the income guarantee over time
D) an expansion of the Earned Income Tax Credit

Question

Quizplus · Accepted Answer

An abrupt increase in the income guarantee over a short time would provide the most useful source of time series variation because it would allow for a clear distinction in labor supply before and after the increase. This would make it easier to identify the effect of the income guarantee on labor supply. A steady increase in the income guarantee over a long time would be less useful because it could be difficult to separate the effect of the income guarantee from other factors that may have contributed to changes in labor supply over time. No change in the income guarantee would not provide any variation to measure the effect of income guarantees on labor supply. While an expansion of the Earned Income Tax Credit could provide some variation to measure the effect of income guarantees on labor supply, it would not provide as clear of a contrast in labor supply before and after the change compared to an abrupt increase in the income guarantee.

Which of the Following Would Be the Most Useful Source