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State Earned Income Tax Credits and Participation in Regular and Informal Work

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  • Samara Potter Gunter

    (Colby College)

Abstract

I use variation in state EITCs between 1997-2005 to identify changes in informal and regular labor supply by unmarried men and women with children. Men?s participation in the informal sector declines by 6 percentage points if a state EITC increases by 10% of the federal credit. Usual regular-sector hours worked per week increase by 4.1 and informal-sector hours per week fall by 2.7 with no effect on total hours. Single men with children appear to respond to state EITCs on the intensive rather than extensive margin and shift away from informal work toward regular work without changing total labor supplied. I find no effects on women?s participation in either regular or informal work.

Suggested Citation

  • Samara Potter Gunter, 2010. "State Earned Income Tax Credits and Participation in Regular and Informal Work," Working Papers 1298, Princeton University, School of Public and International Affairs, Center for Research on Child Wellbeing..
  • Handle: RePEc:pri:crcwel:wp11-03-ff.pdf
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    Cited by:

    1. Marcelo Bergolo & Guillermo Cruces, 2014. "Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension," CEDLAS, Working Papers 0161, CEDLAS, Universidad Nacional de La Plata.
    2. Bergolo, M. & Cruces, G., 2021. "The anatomy of behavioral responses to social assistance when informal employment is high," Journal of Public Economics, Elsevier, vol. 193(C).
    3. Joan Vilá, 2019. "Respuestas en los ingresos frente a un programa de transferencias monetarias: evidencia de un notch a partir de registros administrativos de Uruguay," Documentos de Trabajo (working papers) 19-07, Instituto de Economia - IECON.
    4. 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.
    5. Bergolo, Marcelo & Cruces, Guillermo, 2014. "Work and tax evasion incentive effects of social insurance programs," Journal of Public Economics, Elsevier, vol. 117(C), pages 211-228.
    6. Derrick M. Anderson & Andrew B. Whitford, 2015. "Developing Knowledge States: Technology and the Enhancement of National Statistical Capacity," Papers 1502.07625, arXiv.org.

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    More about this item

    Keywords

    Informal economy; earned income tax credit;

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other

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