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EITC, AFDC, and the Female Headship Decision

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Author Info
S. Dickert-Conlin
S. Houser
Abstract

Concerns about the incentives for female headship for low-income families have focused on Aid to Families with Dependent Children (AFDC); however, the expansion of the Earned Income Tax Credit (EITC) has brought more low-income households into the tax system, subjecting them to additional marriage nonneutralities. Theoretical predictions about the correlations between the EITC and female headship are ambiguous. This paper is the first to provide empirical evidence that the EITC is correlated with female headship decisions. Using data from the Survey of Income and Program Participation, we find no significant correlations between AFDC and female headship. However, the ambiguous effect of the EITC on female headship is evident in our empirical analysis. After controlling for individual effects, we find that higher EITCs are associated with increased female headship for white women, but with decreased female headship for black women. For a sample of white women, we find that a $100 increase in the EITC would increase the probability of female headship by 0.1 percent. For a sample of black women, we find that a $100 increase in the EITC would decrease the probability of female headship by 1.4 percent, although this result is not robust.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1192-99.

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Handle: RePEc:wop:wispod:1192-99

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  1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March. [Downloadable!] (restricted)
  2. Williamson Hoyne, Hilary, 1997. "Does welfare play any role in female headship decisions?," Journal of Public Economics, Elsevier, vol. 65(2), pages 89-117, August. [Downloadable!] (restricted)
  3. Nada Eissa & Hilary Williamson Hoynes, 1998. "The Earned Income Tax Credit and the Labor Supply of Married Couples," NBER Working Papers 6856, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Stacy Dickert & Scott Houser & John Karl Scholz, 1995. "The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 1-50 National Bureau of Economic Research, Inc. [Downloadable!]
  5. Schultz, T.P., 1993. "Marital Status and Fertility in the United States: Welfare and Labor Market Effects," Papers 703, Yale - Economic Growth Center.
  6. Scott Houser & Stacy Dickert-Conlin, 1998. "The Effects of After-tax Wages, Transfer Payments, and Child Care Expenses on Labor Market and Transfer Program Participation," JCPR Working Papers 51, Northwestern University/University of Chicago Joint Center for Poverty Research.
  7. Moffitt, Robert, 1990. "The effect of the U.S. welfare system on marital status," Journal of Public Economics, Elsevier, vol. 41(1), pages 101-124, February. [Downloadable!] (restricted)
  8. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, . [Downloadable!] (restricted)
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  9. V. Joseph Hotz & John Karl Scholz, 2001. "The Earned Income Tax Credit," NBER Working Papers 8078, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Alm, James & Whittington, Leslie A, 1995. "Income Taxes and the Marriage Decision," Applied Economics, Taylor and Francis Journals, vol. 27(1), pages 25-31, January.
  11. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  12. J. K. Scholz, . "The earned income tax credit: Participation, compliance, and antipoverty effectiveness," Institute for Research on Poverty Discussion Papers 1020-93, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
  13. H. W. Hoynes, . "Does welfare play any role in female headship decisions?," Institute for Research on Poverty Discussion Papers 1078-95, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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