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Beyond the Eitc: The Effect of Reducing the Earned Income Tax Credit on Labor Force Participation

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  • Jeremy G. Moulton
  • Alexandra Graddy-Reed
  • Lauren Lanahan

Abstract

We examine variation in the Earned Income Tax Credit (EITC) program when households lose eligibility due to children aging out of the program. This change in eligibility offers a framework for assessing whether the aim of the program of increasing work incentives extends beyond the time recipients qualify for the EITC. We estimate the impact of reducing the EITC on mothers’ labor force participation using a combination of difference-in-differences and household fixed effects models, using data from the National Longitudinal Survey of Youth 1979. The results indicate that some of those who most likely qualify for the EITC (unmarried, less educated mothers) leave the workforce when they lose the benefit.

Suggested Citation

  • Jeremy G. Moulton & Alexandra Graddy-Reed & Lauren Lanahan, 2016. "Beyond the Eitc: The Effect of Reducing the Earned Income Tax Credit on Labor Force Participation," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(2), pages 261-284, June.
    • Handle: RePEc:ntj:journl:v:69:y:2016:i:2:p:261-284
    DOI: 10.17310/ntj.2016.2.01
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    Cited by:

    1. Gulgun Bayaz Ozturk, 2018. "Anti‐Poverty Effects of In‐Kind Transfers Among Divorced or Separated Women in the United States," Poverty & Public Policy, John Wiley & Sons, vol. 10(1), pages 57-80, March.
    2. Khanal, Binod, 2020. "Cash transfers and consumption of healthy and unhealthy food: evidence from tax refunds," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304346, Agricultural and Applied Economics Association.
    3. Elliott Isaac, 2020. "Marriage, Divorce, and Social Safety Net Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1576-1612, April.
    4. Elliott Isaac, 2018. "Suddenly Married: Joint Taxation And The Labor Supply Of Same-Sex Married Couples After U.S. v. Windsor," Working Papers 1809, Tulane University, Department of Economics.
    5. Bastian, Jacob E. & Jones, Maggie R., 2021. "Do EITC expansions pay for themselves? Effects on tax revenue and government transfers," Journal of Public Economics, Elsevier, vol. 196(C).

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