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The EITC, Tax Refunds, and Unemployment Spells

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Abstract

The Earned Income Tax Credit generates large average tax refunds for low-income parents, and these refunds are distributed in a narrow time frame. I rely on this plausibly exogenous source of variation in liquidity to investigate the effect of cash-on-hand on unemployment duration. Among EITC-eligible women, unemployment spells beginning just after tax refund receipt last longer than unemployment spells beginning at other times of year. There is no evidence that tax refund receipt is associated with longer unemployment duration for men, or that the longer durations for women are associated with higher-quality subsequent job matches.

Suggested Citation

  • Sara LaLumia, 2011. "The EITC, Tax Refunds, and Unemployment Spells," Department of Economics Working Papers 2011-08, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2011-08
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    Keywords

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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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