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Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

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  • Diane Whitmore Schanzenbach
  • Michael R. Strain

Abstract

The 2021 Child Tax Credit (CTC) expansion increased government benefits to families, and especially to families with the lowest incomes. Economic theory predicts that this policy intervention would have led to a reduction in labor supply among adults in those families. Our review of available research suggests that employment within broadly defined demographic groups was not reduced by the 2021 CTC changes. However, we present evidence that employment was reduced among mothers with relatively low levels of education — the demographic group that was most affected by the CTC expansion. For the 2021 CTC expansion, theory and evidence were in the strongest alignment when the research design that produced the evidence was most focused on the demographic groups most likely to be affected by the expansion.

Suggested Citation

  • Diane Whitmore Schanzenbach & Michael R. Strain, 2024. "Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence," NBER Working Papers 32552, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32552
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    References listed on IDEAS

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    1. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1063-1114.
    2. Jacob Bastian, 2024. "How Would a Permanent 2021 Child Tax Credit Expansion Affect Poverty and Employment?," National Tax Journal, University of Chicago Press, vol. 77(2), pages 263-311.
    3. Jeehoon Han & Bruce D. Meyer & James X. Sullivan, 2022. "Real-Time Poverty, Material Well-Being, and the Child Tax Credit," National Tax Journal, University of Chicago Press, vol. 75(4), pages 817-846.
    4. Harry J. Holzer & Glenn Hubbard & Michael R. Strain, 2024. "Did pandemic unemployment benefits increase unemployment? Evidence from early state‐level expirations," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 24-38, January.
    5. Jessica Pac & Lawrence M. Berger, 2024. "Quasi‐experimental evidence on the employment effects of the 2021 fully refundable monthly child tax credit," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(1), pages 192-213, January.
    6. Jacob Goldin & Katherine Michelmore, 2022. "Who Benefits from the Child Tax Credit?," National Tax Journal, University of Chicago Press, vol. 75(1), pages 123-147.
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    Cited by:

    1. Marianne P. Bitler, 2023. "The Effects of the 2021 Child Tax Credit on Poverty," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 75-89, November.
    2. Elizabeth Ananat & Irwin Garfinkel, 2023. "The Potential Long-Run Impact of a Permanently Expanded Child Tax Credit," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 192-208, November.
    3. Sauval, Maria & Duncan, Greg J. & Gennetian, Lisa A. & Magnuson, Katherine A. & Fox, Nathan A. & Noble, Kimberly G. & Yoshikawa, Hirokazu, 2024. "Unconditional cash transfers and maternal employment: Evidence from the Baby’s First Years study," Journal of Public Economics, Elsevier, vol. 236(C).
    4. Anna Aizer & Adriana Lleras-Muney & Katherine Michelmore, 2023. "The Effects of the 2021 Child Tax Credit on Child Developmental Outcomes," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 172-189, November.
    5. Bradley Hardy & Charles Hokayem, 2023. "The Effects of the 2021 Child Tax Credit on Racial and Ethnic Inequalities in Well-Being," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 157-171, November.
    6. Timothy M. Smeeding, 2023. "What We Learned from the 2021 Child Tax Credit Expansion," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 229-244, November.

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    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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