The EITC and Linking Data for Examining Multi-Generational Effects
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Chapter in forthcoming NBER book Measuring and Understanding the Distribution and Intra/Inter-Generational Mobility of Income and Wealth, Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, and Arthur Kennickell, editors
The effects of public policy on intergenerational social and economic mobility in the United States are not well understood. We study how the largest federal tax-based policy intended to promote work and increase incomes among the poor—the Earned Income Tax Credit (EITC)—affects the socio-economic standing of children who grew up in households affected by the policy. Using the universe of tax filer records for children linked to their parents, matched with demographic and household information from decennial and American Community Survey data, we exploit exogenous differences by children’s ages in the births and “aging out” of siblings to assess the causal effect of EITC generosity on child outcomes. We focus on assessing upward mobility in the child income distribution. Our findings suggest significant and mostly positive effects of more generous EITC refunds on the next generation that vary substantially depending on the child’s household type (single-mother or married family) and by the child’s gender. In this paper, we detail how we define the variation in EITC generosity, explain the construction of the intergenerational link and sibling groups, and provide summary statistics and estimates of average intent-to-treat effects.