The Interaction of Metropolitan Area Costs and the Federal Earned Income Tax Credit: One Size Fits All?
The Federal Earned Income Tax Credoit (EITC) contributed to increasing employment rates for single women during the 1990s. This paper expands on what is known about the labor supply response to the EITC by exploiting differences in the cost-of-living faced by potentially eligible recipients in different geographic areas. Using the 1993 EITC expansion, we demonstrate that the labor supply response varies considerably with metropolitan area cost-of-living. We identify an increase in labor force participation among single mothers of as much as 10 percentage points in the lowest cost metropolitan areas. There is no discernable participation response in metropolitan areas with the highest housing costs, where approximately 40 of the population lives. We find little response along the intensive margin, regardless of the costs in the metropolitan area. We conclude that the welfare-enhancing effects of the EITC are undermined by the interaction of the program's fixed national rules and geographic variation in wages and cost of living. In addition, our findings suggest that the federal EITC does little to reduce joblessness in many of the nation's largest cities.
|Date of creation:||Sep 2008|
|Contact details of provider:|| Postal: 426 Eggers Hall, Syracuse, New York USA 13244-1020|
Phone: (315) 443-3114
Fax: (315) 443-1081
Web page: http://www.maxwell.syr.edu/cpr.aspx
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:max:cprwps:110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kelly Bogart)or (Katrina Wingle)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.