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The effects of income on health: new evidence from the Earned Income Tax Credit

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  • Otto Lenhart

    (University of Strathclyde, Department of Economics, Duncan Wing)

Abstract

This study examines the relationship between income and health by using an expansion of the Earned Income Tax Credit (EITC), which increased benefits to households with at least two children, as a source of exogenous variations of earnings. The paper adds to previous work by: (1) estimating treatment effects on the treated using simulated EITC benefits and longitudinal data; (2) testing whether health effects vary across the three different parts of the EITC schedule; (3) examining the role of food expenditures and health insurance as potential mechanisms. The study finds that income improves the likelihood of affected heads of households reporting to be in excellent or very good health by 6.9 to 8.9 percentage points. The effects are largest in the plateau phase of the EITC schedule, where previous researchers have identified pure income effects of the program. The results are robust to several additional specifications, including a semi-parametric DD model and specifications that account for the potential endogeneity of sample. When examining potential channels underlying the relationship between income and health, I find that affected household increase their food expenditures by 10.5 to 20.3 percent and are 1.52 percent more likely to have health insurance coverage.

Suggested Citation

  • Otto Lenhart, 2019. "The effects of income on health: new evidence from the Earned Income Tax Credit," Review of Economics of the Household, Springer, vol. 17(2), pages 377-410, June.
  • Handle: RePEc:kap:reveho:v:17:y:2019:i:2:d:10.1007_s11150-018-9429-x
    DOI: 10.1007/s11150-018-9429-x
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    3. Simpson, Julija & Albani, Viviana & Bell, Zoe & Bambra, Clare & Brown, Heather, 2021. "Effects of social security policy reforms on mental health and inequalities: A systematic review of observational studies in high-income countries," Social Science & Medicine, Elsevier, vol. 272(C).
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    5. Barbara Liberda & Katarzyna Sałach & Marek Pęczkowski, 2021. "The effects of child benefit on household saving," Working Papers 2021-02, Faculty of Economic Sciences, University of Warsaw.
    6. Khanal, Binod, 2020. "Cash transfers and consumption of healthy and unhealthy food: evidence from tax refunds," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304346, Agricultural and Applied Economics Association.
    7. Otto Lenhart, 2019. "The effects of state‐level earned income tax credits on suicides," Health Economics, John Wiley & Sons, Ltd., vol. 28(12), pages 1476-1482, December.
    8. Otto Lenhart, 2021. "Earned income tax credit and crime," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 589-607, July.
    9. Jiwei Chen, 2021. "Do minimum wage increases benefit worker health? Evidence from China," Review of Economics of the Household, Springer, vol. 19(2), pages 473-499, June.
    10. 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).

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