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

Jeremy G. Moulton, Alexandra Graddy-Reed, and 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.

Citation

Jeremy G. Moulton, Alexandra Graddy-Reed, and Lauren Lanahan (2016), Beyond the Eitc: The Effect of Reducing the Earned Income Tax Credit on Labor Force Participation, National Tax Journal, 69:2, pp. 261-284

DOI: dx.doi.org/10.17310/ntj.2016.2.01