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Working Credits: A Low-Cost Alternative to Earned Income Tax Credits?

Author

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  • Andrew Leigh

    (Economics Program, Research School of Social Sciences, The Australian National University)

  • Roger Wilkins

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

Over recent years, several developed countries have implemented earned income tax credits in order to encourage welfare recipients to move into work. Here, we investigate the impact of ‘Working Credits', which increased the incentives for welfare recipients to work, but only for a temporary period. Using differences-in-differences and regression-adjusted differences-in-differences, we find evidence that the introduction of the Working Credit increased employment rates, earnings and exits for those on income support. Results from matched differences-in-differences are less precise, but generally consistent with the other two empirical strategies. Back-of-the-envelope estimates suggest that on a cost-per-job basis, the Working Credit compares favourably with existing labour market programs.

Suggested Citation

  • Andrew Leigh & Roger Wilkins, 2009. "Working Credits: A Low-Cost Alternative to Earned Income Tax Credits?," Melbourne Institute Working Paper Series wp2009n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2009n07
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2009n07.pdf
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    References listed on IDEAS

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