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Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?

Author

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  • H. Shaefer
  • Xiaoqing Song
  • Trina Williams Shanks

Abstract

The Earned Income Tax Credit (EITC) is a refundable credit for low-income workers mainly targeted at families with children. This study uses the Survey of Income and Program Participation’s topical modules on Assets and Liabilities to examine associations between the EITC expansions during the early 1990s and the unsecured debt of the households of single mothers. We use two difference-in-differences comparisons over the study period 1988–1999, first comparing single mothers to single childless women, and then comparing single mothers with two or more children to single mothers with exactly one child. In both cases we find that the EITC expansions are associated with a relative decline in the unsecured debt of affected households of single mothers. While not direct evidence of a causal relationship, this is suggestive evidence that single mothers may have used part of their EITC to limit the growth of their unsecured debt during this period. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • H. Shaefer & Xiaoqing Song & Trina Williams Shanks, 2013. "Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?," Review of Economics of the Household, Springer, vol. 11(4), pages 659-680, December.
    • Handle: RePEc:kap:reveho:v:11:y:2013:i:4:p:659-680
    DOI: 10.1007/s11150-012-9144-y
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    References listed on IDEAS

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    2. Mathieu Despard & Stephen Roll & Michal Grinstein‐Weiss & Bradley Hardy & Jane Oliphant, 2023. "Can behavioral nudges and incentives help lower‐income households build emergency savings with tax refunds? Evidence from field and survey experiments," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 245-263, January.
    3. O. Kondratjeva & S. P. Roll & M. Despard & M. Grinstein-Weiss, 2022. "The Impact of Tax Refund Delays on the Experience of Hardship Among Lower-Income Households," Journal of Consumer Policy, Springer, vol. 45(2), pages 239-280, June.
    4. Neil Bania & Laura Leete, 2022. "Monthly income volatility and health outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 636-658, October.
    5. Leah Hamilton & Mathieu Despard & Stephen Roll & Dylan Bellisle & Christian Hall & Allison Wright, 2023. "Does Frequency or Amount Matter? An Exploratory Analysis the Perceptions of Four Universal Basic Income Proposals," Social Sciences, MDPI, vol. 12(3), pages 1-19, February.
    6. Nicardo S. McInnis & Katherine Michelmore & Natasha Pilkauskas, 2023. "The Intergenerational Transmission of Poverty and Public Assistance: Evidence from the Earned Income Tax Credit," NBER Working Papers 31429, National Bureau of Economic Research, Inc.
    7. Kyoung Tae Kim & Melissa J. Wilmarth, 2016. "Government Subsidies and Household Debt Burden After the Great Recession," Journal of Family and Economic Issues, Springer, vol. 37(3), pages 349-358, September.
    8. Mary Eschelbach Hansen & Julie Routzahn, 2014. "Gender Differences in Attitudes Toward Debt and Financial Position: The Impact of the Great Recession," Working Papers 2014-10, American University, Department of Economics.
    9. Dur, Robert & Fleming, Dimitry & van Garderen, Marten & van Lent, Max, 2021. "A social norm nudge to save more: A field experiment at a retail bank," Journal of Public Economics, Elsevier, vol. 200(C).
    10. Mathieu R. Despard & Michal Grinstein-Weiss & Chunhui Ren & Shenyang Guo & Ramesh Raghavan, 2017. "Effects of a Tax-Time Savings Intervention on Use of Alternative Financial Services among Lower-Income Households," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(2), pages 355-379, July.
    11. Olga Kondratjeva & Stephen P. Roll & Mathieu Despard & Michal Grinstein‐Weiss, 2021. "The impact of state earned income tax credit increases on material and medical hardship," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(3), pages 872-910, September.
    12. Collin, Daniel F. & Shields-Zeeman, Laura S. & Batra, Akansha & White, Justin S. & Tong, Michelle & Hamad, Rita, 2021. "The effects of state earned income tax credits on mental health and health behaviors: A quasi-experimental study," Social Science & Medicine, Elsevier, vol. 276(C).
    13. Roll, Stephen & Grinstein-Weiss, Michal & Gallagher, Emily & Cryder, Cynthia, 2020. "Can pre-commitment increase savings deposits? Evidence from a tax-time field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 357-380.
    14. Natasha Pilkauskas & Katherine Michelmore, 2017. "Does the Earned Income Tax Credit Reduce Housing Instability?," Working Papers wp18-01-ff, Princeton University, School of Public and International Affairs, Center for Research on Child Wellbeing..

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    More about this item

    Keywords

    Earned Income Tax Credit; Single Mothers; Unsecured Debt; H23; H53; I38;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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