Employment Effects of the Earned Income Tax Credit: Taking the Long View
The Earned Income Tax Credit (EITC) is the cornerstone U.S. anti-poverty program for families with children, typically lifting millions of children out of poverty each year. Targeted to low-income households with children, and only available to those who work, the EITC contains strong incentives for non-workers to become employed. Most of the existing economics literature focuses on federal EITC expansions in the 1980s and 1990s. This paper takes a longer view, studying all federal expansions since the program’s inception in 1975. We find robust evidence that EITC expansions increase the extensive margin of labor supply.
The authors thank Jacob Bastian, Jeffrey Clemens, Bob Greenstein, Hilary Hoynes, Jonathan Meer, Bruce Meyer, Robert Moffitt, Jesse Rothstein, Daniel Shoag, and Stan Veuger for helpful discussions. We thank Abigail Pitts and Sachin Shukla, and especially Duncan Hobbs, for excellent research assistance. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Employment Effects of the Earned Income Tax Credit: Taking the Long View, Diane Whitmore Schanzenbach, Michael R. Strain. in Tax Policy and the Economy, Volume 35, Moffitt. 2021