The Long-Run Effects of the Earned Income Tax Credit on Women's Earnings
We use longitudinal data on marriage and children from the Panel Study of Income Dynamics to characterize women’s exposure to the federal and state Earned Income Tax Credit (EITC) during their first two decades of adulthood. We then use measures of this exposure to estimate the long-run effects of the EITC on women’s labor market outcomes – especially wages and earnings – as mature adults. We find evidence indicating that exposure to a more generous EITC when women were unmarried and had young (pre-school) children leads to higher earnings and hours, and perhaps wages, in the longer run. We also find evidence that exposure to a more generous EITC when women had young children but were married leads to lower earnings and hours in the longer run. These longer-run effects are to some extent consistent with what we would expect if the short-run effects of the EITC on employment that are documented in other work, and predicted by theory, are reflected in effects of the EITC on cumulative labor market experience (and other consequences of labor market attachment) that influence earnings.
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Document Object Identifier (DOI): 10.3386/w24114
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