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The EITC and the Extensive Margin: A Reappraisal

Author

Listed:
  • Henrik Kleven

    (Princeton University)

Abstract

This paper reappraises the impact of the Earned Income Tax Credit (EITC) on labor supply at the extensive margin for single mothers. I investigate every EITC reform at the state and federal level since the inception of the policy. Apart from the federal 1993 reform, EITC expansions have not had any clear and significant effects on employment. The 1993 reform is associated with large employment effects, but these effects align more closely with confounding changes from welfare reform and the macroeconomy than with the EITC. I conduct a comprehensive analysis of the robustness of the EITC null result to model uncertainty.

Suggested Citation

  • Henrik Kleven, 2022. "The EITC and the Extensive Margin: A Reappraisal," Working Papers 2022-14, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2022-14
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    File URL: https://www.henrikkleven.com/uploads/3/7/3/1/37310663/kleven_eitc_sep2022.pdf
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    More about this item

    Keywords

    labor supply; taxation; fiscal policy;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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