Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298750 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] IZA Journal of Labor Policy [ISSN:] 2193-9004 [Volume:] 10 [Issue:] 1 [Article No.:] 7 [Year:] 2020 [Pages:] 1-53
Publisher: 
Sciendo, Warsaw
Abstract: 
The Earned Income Tax Credit (EITC) is one of the largest anti-poverty programs in the United States, providing over $67 billion to more than 27 million families for the tax year 2016, an average of $2,455. By subsidizing the earnings of low-income workers, the EITC reduces poverty both directly through the credit itself and indirectly through labor supply incentives. The two primary determinants of the amount a tax unit receives are earned income and number of children. Many studies define eligibility based on the presence of children in a household and separate analyses by marital status, a reflection of the fundamentally different incentives the EITC poses for single- and dual-earner households. However, as the EITC theoretically encourages fertility and generally discourages marriage, endogenous responses along these two dimensions could bias estimates which rely on them for identification and sample selection. In this paper, I revisit the classic question of the EITC's labor market effects while exploiting a source of arguably exogenous variation in EITC receipt that does not rely on these potentially endogenous characteristics: birth timing around the end of the calendar year. Using the Survey of Income and Program Participation, my results show positive earnings and employment effects for unmarried women in the 12 months following their first/only child's birth, including for those with a high school degree or less (low-ed). Overall, the results are usually small and insignificant for married women, with the exception of negative (and sometimes significant) effects on earnings for low-ed married women. Using a difference-in-discontinuities approach, I separate the income effect of the credit itself from the information effect, which, I argue, occurs when women receive the EITC for the first time. I show that, while the income effect is negative across all groups of women, the information effects are positive for unmarried women and negative for married women, again consistent with theory and the body of evidence on the EITC.
Subjects: 
earned income tax credit
mothers
labor supply
public policy
JEL: 
I38
J22
J28
J38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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