Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings
We estimate the impacts of the Earned Income Tax Credit on labor supply using local variation in knowledge about the EITC schedule. We proxy for EITC knowledge in a Zip code with the fraction of individuals who manipulate reported self-employment income to maximize their EITC refund. This measure varies significantly across areas. We exploit changes in EITC eligibility at the birth of a child to estimate labor supply effects. Individuals in high-knowledge areas change wage earnings sharply to obtain larger EITC refunds relative to those in low-knowledge areas. These responses come primarily from intensive-margin earnings increases in the phase-in region.
Volume (Year): 103 (2013)
Issue (Month): 7 (December)
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- Bises, Bruno, 1990. "Income Tax Perception and Labour Supply in a Sample of Industry Workers," Public Finance = Finances publiques, , vol. 45(1), pages 3-17.
- Kopczuk, Wojciech & Pop-Eleches, Cristian, 2007.
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Elsevier, vol. 91(7-8), pages 1351-1367, August.
- Wojciech Kopczuk & Cristian Pop-Eleches, 2005. "Electronic Filing, Tax Preparers, and Participation in the Earned Income Tax Credit," NBER Working Papers 11768, National Bureau of Economic Research, Inc.
- Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, 05.
- Raj Chetty, 2009. "Bounds on Elasticities with Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," NBER Working Papers 15616, National Bureau of Economic Research, Inc.
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