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Employment Effects of the Earned Income Tax Credit: Taking the Long View

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  • Diane Whitmore Schanzenbach
  • Michael R. Strain

Abstract

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.

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  • Diane Whitmore Schanzenbach & Michael R. Strain, 2020. "Employment Effects of the Earned Income Tax Credit: Taking the Long View," NBER Working Papers 28041, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28041
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    Cited by:

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    2. Maggie R. Jones & Emilia Simeonova & Randall Akee, 2020. "The EITC and Intergenerational Mobility," Working Papers 20-35, Center for Economic Studies, U.S. Census Bureau.
    3. Michael R. Strain, 2021. "An Argument Against The $15 Minimum Wage," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(4), pages 1289-1297, September.
    4. Messel, Matt & Swensen, Isaac & Urban, Carly, 2023. "The effects of expanding access to mental health services on SS(D)I applications and awards," Labour Economics, Elsevier, vol. 81(C).
    5. Jacob E. Bastian, 2024. "The EITC in rural and economically distressed areas: More bang per buck?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(1), pages 136-159, February.
    6. Bradley L. Hardy & Elizabeth Krause & James P. Ziliak, 2024. "Income inequality in the United States, 1975–2022," Fiscal Studies, John Wiley & Sons, vol. 45(2), pages 155-171, June.
    7. Cesur, Resul & Rodríguez-Planas, Núria & Roff, Jennifer Louise & Simon, David, 2022. "Domestic Violence and Income: Quasi-Experimental Evidence from the Earned Income Tax Credit," IZA Discussion Papers 15208, Institute of Labor Economics (IZA).
    8. Jensen, Mathias Fjællegaard & Blundell, Jack, 2024. "Income effects and labour supply: Evidence from a child benefits reform," Journal of Public Economics, Elsevier, vol. 230(C).
    9. Hema Shah & Lisa A. Gennetian, 2024. "Unconditional cash transfers for families with children in the U.S.: a scoping review," Review of Economics of the Household, Springer, vol. 22(2), pages 415-450, June.
    10. Hicks, Jeffrey & Simard-Duplain, Gaëlle & Green, David A. & Warburton, William, 2022. "The effect of reducing welfare access on employment, health, and children's long-run outcomes," CLEF Working Paper Series 51, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    11. Jonathan Meer & Joshua Witter, 2022. "Effects of the Earned Income Tax Credit for Childless Adults: A Regression Discontinuity Approach," NBER Chapters, in: Tax Policy and the Economy, Volume 37, pages 175-198, National Bureau of Economic Research, Inc.
    12. Francesco Agostinelli & Emilio Borghesan & Giuseppe Sorrenti, 2020. "Welfare, Workfare and Labor Supply: A Unified Evaluation," Working Papers 2020-083, Human Capital and Economic Opportunity Working Group.
    13. Deza, Monica & Maclean, Johanna Catherine & Solomon, Keisha, 2022. "Local access to mental healthcare and crime," Journal of Urban Economics, Elsevier, vol. 129(C).
    14. Lisa Barrow & Bea Rivera & Diane Whitmore Schanzenbach, 2024. "Work, Poverty, and Social Benefits Over the Past Three Decades," Working Papers 24-22, Federal Reserve Bank of Cleveland.
    15. Aida Farmand & Owen Davis, 2021. "Who Does the Earned Income Tax Credit Benefit? A Monopsony View," SCEPA working paper series. 2021-02, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    16. Kesselman, Jonathan & Petit, Gillian, 2020. "Earnings Supplementation for British Columbia: Pros, Cons, and Structure," MPRA Paper 105931, University Library of Munich, Germany.
    17. Lisa A. Gennetian & Greg Duncan & Nathan A. Fox & Katherine Magnuson & Sarah Halpern-Meekin & Kimberly G. Noble & Hirokazu Yoshikawa, 2022. "Unconditional Cash and Family Investments in Infants: Evidence from a Large-Scale Cash Transfer Experiment in the U.S," NBER Working Papers 30379, National Bureau of Economic Research, Inc.
    18. Petit, Gillian & Kesselman, Jonathan, 2020. "Reforms to Earnings Supplement Programs in British Columbia: Making Work Pay for Low-Income Workers," MPRA Paper 105925, University Library of Munich, Germany.
    19. Nicardo S. McInnis & Katherine Michelmore & Natasha Pilkauskas, 2023. "The Intergenerational Transmission of Poverty and Public Assistance: Evidence from the Earned Income Tax Credit," NBER Working Papers 31429, National Bureau of Economic Research, Inc.
    20. Jensen, Mathias Fjællegaard & Blundell, Jack, 2023. "Income effects and labour supply: evidence from a child benefits reform," LSE Research Online Documents on Economics 121357, London School of Economics and Political Science, LSE Library.
    21. Schanzenbach, Diane Whitmore, 2023. "Understanding SNAP: An overview of recent research," Food Policy, Elsevier, vol. 114(C).
    22. 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).
    23. Naveen Singhal, 2021. "Discrete Choice Models for Estimating Labor Supply: Working Paper 2021-04," Working Papers 57027, Congressional Budget Office.

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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