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The EITC, Tax Refunds, and Unemployment Spells

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Abstract

The Earned Income Tax Credit generates large average tax refunds for low-income parents, and these refunds are distributed in a narrow time frame. I rely on this plausibly exogenous source of variation in liquidity to investigate the effect of cash-on-hand on unemployment duration. Among EITC-eligible women, unemployment spells beginning just after tax refund receipt last longer than unemployment spells beginning at other times of year. There is no evidence that tax refund receipt is associated with longer unemployment duration for men, or that the longer durations for women are associated with higher-quality subsequent job matches.

Suggested Citation

  • Sara LaLumia, 2011. "The EITC, Tax Refunds, and Unemployment Spells," Department of Economics Working Papers 2011-08, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2011-08
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    Cited by:

    1. Fadlon, Itzik & Nielsen, Torben Heien, 2019. "Household labor supply and the gains from social insurance," Journal of Public Economics, Elsevier, vol. 171(C), pages 18-28.
    2. Elira Kuka, 2020. "Quantifying the Benefits of Social Insurance: Unemployment Insurance and Health," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 490-505, July.
    3. Vargas Juliana Mesén & Linden Bruno Van der, 2019. "Why Cash Transfer Programs Can Both Stimulate and Slow Down Job Finding," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-27, June.
    4. Tal Gross & Timothy J. Layton & Daniel Prinz, 2022. "The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments," American Economic Review: Insights, American Economic Association, vol. 4(2), pages 175-190, June.
    5. Dow, Wiiliam H & Godoey, Anna & Lowenstein, Christopher A & Reich, Michael, 2019. "Can Economic Policies Reduce Deaths of Despair? Working Paper #104-19," Institute for Research on Labor and Employment, Working Paper Series qt14f015df, Institute of Industrial Relations, UC Berkeley.
    6. Kay Blaufus & Frank Hechtner & Axel Möhlmann, 2017. "The Effect of Tax Preparation Expenses for Employees: Evidence from Germany," Contemporary Accounting Research, John Wiley & Sons, vol. 34(1), pages 525-554, March.
    7. Yuanyuan Chen & Zichen Deng, 2019. "Liquidity Constraint Shock, Job Search and Post Match Quality—Evidence from Rural-to-Urban Migrants in China," Journal of Labor Research, Springer, vol. 40(3), pages 332-355, September.
    8. 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).
    9. Juliana MESÉN VARGAS & Bruno VAN DER LINDEN, 2017. "Is there always a trade-off between insurance and incentives? The case of unemployment with subsistence constraints," LIDAM Discussion Papers IRES 2017014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Zhang, Guangli, 2021. "The Effect of Unemployment Benefit Pay Frequency on UI Claimants' Job Search Behaviors," Working Papers 21-3, Sinquefield Center for Applied Economic Research, Saint Louis University.
    11. Sara LaLumia & James M. Sallee & Nicholas Turner, 2015. "New Evidence on Taxes and the Timing of Birth," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 258-293, May.
    12. Xie, Zoe, 2019. "Delayed collection of unemployment insurance in recessions," European Economic Review, Elsevier, vol. 118(C), pages 274-295.
    13. Laura Tach & Alicia Eads, 2015. "Trends in the Economic Consequences of Marital and Cohabitation Dissolution in the United States," Demography, Springer;Population Association of America (PAA), vol. 52(2), pages 401-432, April.
    14. Alexandra B. Stanczyk, 2020. "The Dynamics of U.S. Household Economic Circumstances Around a Birth," Demography, Springer;Population Association of America (PAA), vol. 57(4), pages 1271-1296, August.
    15. Edwards Kathryn Anne, 2020. "Who helps the unemployed? Workers’ receipt of public and private transfers," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-26, March.
    16. Philippe Wingender & Sara LaLumia, 2015. "Income Effects in Labor Supply: Evidence from Child-Related Tax Benefits," Department of Economics Working Papers 2015-04, Department of Economics, Williams College.
    17. Can Cui, 2017. "Cash-on-hand and demand for credit," Empirical Economics, Springer, vol. 52(3), pages 1007-1039, May.
    18. William H. Dow & Anna Godøy & Christopher A. Lowenstein & Michael Reich, 2019. "Can Economic Policies Reduce Deaths of Despair?," NBER Working Papers 25787, National Bureau of Economic Research, Inc.
    19. Day Manoli & Nicholas Turner, 2018. "Cash-on-Hand and College Enrollment: Evidence from Population Tax Data and the Earned Income Tax Credit," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 242-271, May.
    20. Andrew Foote & Michel Grosz & Ann Stevens, 2019. "Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response," ILR Review, Cornell University, ILR School, vol. 72(1), pages 101-126, January.
    21. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    22. Taryn W. Morrissey, 2023. "The Earned Income Tax Credit and Short-Term Changes in Parents’ Time Investments in Children," Journal of Family and Economic Issues, Springer, vol. 44(2), pages 412-433, June.

    More about this item

    Keywords

    Tax evasion; compliance; honesty; dependent exemption;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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