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Marriott Marquis, Torrey Pines 1
American Economic Association
Impacts of the Earned Income Tax Credit
Saturday, Jan. 4, 2020 2:30 PM - 4:30 PM (PDT)
- Chair: Riley Wilson, Brigham Young University
TOTS AND TEENS: HOW DOES CHILD’S AGE INFLUENCE MATERNAL LABOR SUPPLY RESPONSE TO THE EARNED INCOME TAX CREDIT?
AbstractBuilding on earlier work that shows that the Earned Income Tax Credit (EITC) has a substantial positive effect on maternal labor supply, we show that labor supply effects are concentrated among mothers with children under age three, with only moderate effects of the EITC on the labor supply of mothers with teenagers. These increases in labor supply are coupled with large increases in the use and cost of child care among mothers with children under age three. Decomposition analyses suggest that the EITC explains more than half of the increase in single mother’s labor supply from 1990 to 2000 among mothers with infants. Results highlight the importance of considering heterogeneous treatment effects of policy and raise implications for child care policy and other family policy.
The Impact of Social Networks on EITC Claiming Behavior
AbstractSocial networks have the potential to affect labor market decisions and program participation. Using the Social Connectedness Index (Bailey et al., 2018) to capture county-to-county Facebook linkages, I explore what happens to county-level Earned Income Tax Credit (EITC) claiming behavior when the county's out-of-state social network is exposed to a newly implemented state EITC. When the number of out-of-state friends exposed to a state EITC increases the composition of EITC claims shifts toward more EITC households claiming self-employment income. The income distribution of EITC claiming households also shifts, moving away from the tails of the EITC credit, towards the income level that generates the largest EITC credit. This mimics the direct impacts of state level EITC policies on filing behavior, consistent with social networks providing information or increasing salience about EITC policy.
The Dynamics of Earned Income Tax Credit Eligibility
AbstractThe Earned Income Tax Credit (EITC) has become one of the primary components of the U.S safety net for poor families, but very little is known about the dynamics and persistence of EITC eligibility. This paper uses data from the Panel Study of Income Dynamics (PSID) to measure persistence of eligibility for the EITC, paying particular attention to persistence across multiple spells of eligibility. We find that single-female headed households have extremely persistent eligibility for the EITC, with two-thirds of these families becoming eligible for the credit maintaining their eligibility for five or more years over the subsequent decade. When considering all household types just beginning a spell of eligibility, we find that over half are eligible for more than five years in the next decade. These results point to substantially more persistence in EITC eligibility than prior work based in IRS administrative data. This is due to both our consideration of multiple spells of eligibility and to the ability to follow single parents across transitions in marriage and household structure in the PSID.
University of New Hampshire
University of Connecticut
- H2 - Taxation, Subsidies, and Revenue
- I3 - Welfare, Well-Being, and Poverty