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Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage

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  • David Neumark
  • William Wascher

Abstract

This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.

Suggested Citation

  • David Neumark & William Wascher, 2000. "Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage," NBER Working Papers 7599, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7599
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    More about this item

    JEL classification:

    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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