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Information, Preferences, and Public Benefit Participation: Experimental Evidence from the Advance EITC and 401(k) Savings

  • Damon Jones
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    Within a field experiment, I present a treatment group with reductions in information, administrative, stigma, and procrastination costs associated with the Advance EITC. The treatment increases Advance participation from 0.3 to 1.2 percent. Another treatment simultaneously encourages 401(k) savings, increasing 401(k) participation from 46 to 50 percent. However, there is no additional increase in Advance participation when coupled with the 401(k) treatment, casting doubt on a long-term forced savings motive. The results indicate that EITC recipients actively forgo the Advance. Further work is needed to identify what underlies these preferences. Possible explanations include uncertainty and/or short-term forced savings motives. (JEL D14, D82, H23, H24, H31)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/app.2.2.147
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    Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

    Volume (Year): 2 (2010)
    Issue (Month): 2 (April)
    Pages: 147-63

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    Handle: RePEc:aea:aejapp:v:2:y:2010:i:2:p:147-63
    Note: DOI: 10.1257/app.2.2.147
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    1. Jennifer L. Romich & Thomas Weisner, 2000. "How Families View and Use the EITC: Advanced Payment versus Lump-sum Delivery," JCPR Working Papers 138, Northwestern University/University of Chicago Joint Center for Poverty Research.
    2. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
    3. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
    4. Laurence J. Kotlikoff & David Rapson, 2006. "Does It Pay, At The Margin, To Work And Save? -- Measuring Effective Marginal Taxes On Americans' Labor Supply And Saving," Boston University - Department of Economics - Working Papers Series WP2006-048, Boston University - Department of Economics.
    5. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    6. Sherrie L.W. Rhine & Sabrina Su & Yazmin Osaki & Steven Y. Lee, 2005. "Householder response to the earned income tax credit: path of sustenance or road to asset building," Proceedings 957, Federal Reserve Bank of Chicago.
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