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Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children
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Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children

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  • Maria Cancian
  • Arik Levinson

Abstract

We examine the labor market consequences of the Earned Income Tax Credit (EITC), comparing labor market behavior of eligible parents in Wisconsin, which supplements the federal EITC for families with three children, to that of similar parents in states that do not supplement the federal EITC. Data come from the 2000 Census of Population. Most previous studies have relied on changes in the EITC over time, or EITC eligibility differences for families with and without children, or have extrapolated from measured labor supply responses to other tax and benefit programs, and find significant effects of the EITC on employment. In contrast, our cross-state comparison examines a larger difference in EITC subsidy rates, uses more similar treatment and control groups, relies on a policy that has been in place for 5 years, and finds no effect of the EITC on employment or hours worked.

Suggested Citation

  • Maria Cancian & Arik Levinson, 2005. "Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children," NBER Working Papers 11454, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11454
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    Cited by:

    1. David Neumark & William Wascher, 2011. "Does a Higher Minimum Wage Enhance the Effectiveness of the Earned Income Tax Credit?," ILR Review, Cornell University, ILR School, vol. 64(4), pages 712-746, July.
    2. Koulovatianos, Christos & Schrder, Carsten & Schmidt, Ulrich, 2009. "Nonmarket Household Time and the Cost of Children," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 42-51.
    3. Chris Herbst, 2010. "The labor supply effects of child care costs and wages in the presence of subsidies and the earned income tax credit," Review of Economics of the Household, Springer, vol. 8(2), pages 199-230, June.
    4. Gunter, Samara, 2013. "State Earned Income Tax Credits and Participation in Regular and Informal Work," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(1), pages 33-62, March.
    5. Kartik B. Athreya & Devin Reilly & Nicole B. Simpson, 2010. "Earned income tax credit recipients: income, marginal tax rates, wealth, and credit constraints," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 96(3Q), pages 229-258.
    6. Xiaoling Ang, 2015. "The Effects of Cash Transfer Fertility Incentives and Parental Leave Benefits on Fertility and Labor Supply: Evidence from Two Natural Experiments," Journal of Family and Economic Issues, Springer, vol. 36(2), pages 263-288, June.
    7. Kenneth A. Couch & Douglas J. Besharov & David Neumark, 2013. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(1), pages 142-171, January.
    8. Bradley L. Hardy & Daniel Muhammad & Rhucha Samudra, 2015. "The Effect of the Earned Income Tax Credit in the District of Columbia on Poverty and Income Dynamics," Upjohn Working Papers 15-230, W.E. Upjohn Institute for Employment Research.
    9. Timothy F. Harris, 2018. "Do SNAP Work Requirements Work?," Upjohn Working Papers 19-297, W.E. Upjohn Institute for Employment Research.
    10. Susan Averett & Yang Wang, 2013. "The Effects Of Earned Income Tax Credit Payment Expansion On Maternal Smoking," Health Economics, John Wiley & Sons, Ltd., vol. 22(11), pages 1344-1359, November.
    11. Nicole Simpson & Jill Tiefenthaler & Jameson Hyde, 2010. "The Impact of the Earned Income Tax Credit on Economic Well-Being: A Comparison Across Household Types," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 29(6), pages 843-864, December.
    12. Pedro Gomis-Porqueras & Oscar Mitnik & Adrian Peralta-Alva & Maximilian D. Schmeiser, 2011. "The Effects of Female Labor Force Participation on Obesity," Working Papers 2011-16, University of Miami, Department of Economics.
    13. Averett, Susan L. & Wang, Yang, 2015. "The Effects of the Earned Income Tax Credit on Children's Health, Quality of Home Environment, and Non-Cognitive Skills," IZA Discussion Papers 9173, Institute of Labor Economics (IZA).
    14. Neumark, David & Shirley, Peter, 2020. "The Long-Run Effects of the Earned Income Tax Credit on Women's Labor Market Outcomes," Labour Economics, Elsevier, vol. 66(C).
    15. repec:pri:crcwel:wp11-03-ff is not listed on IDEAS
    16. David Neumark, 2009. "Alternative Labor Market Policies to Increase Economic Self-Sufficiency: Mandating Higher Wages, Subsidizing Employment, and Increasing Productivity," NBER Working Papers 14807, National Bureau of Economic Research, Inc.
    17. Simpson, Nicole B., 2013. "Families, Taxes and the Welfare System," IZA Discussion Papers 7369, Institute of Labor Economics (IZA).
    18. Kampon Adireksombat, 2010. "The Effects of the 1993 Earned Income Tax Credit Expansion on the Labor Supply of Unmarried Women," Public Finance Review, , vol. 38(1), pages 11-40, January.
    19. John Karl Scholz, 2010. "The Earned Income Tax Credit and the U.S. Low-Wage Labor Market," ESRI Discussion paper series 237, Economic and Social Research Institute (ESRI).
    20. Hilary Hoynes, 2007. "The EITC Disincentive: A Reply to Paul Trampe," Econ Journal Watch, Econ Journal Watch, vol. 4(3), pages 321-325, September.
    21. Lauren E. Jones & Guangyi Wang & Tansel Yilmazer, 2022. "The long‐term effect of the Earned Income Tax Credit on women's physical and mental health," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1067-1102, June.
    22. Averett, Susan L. & Wang, Yang, 2012. "The Effects of EITC Payment Expansion on Maternal Smoking," IZA Discussion Papers 6680, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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