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Anti-Poverty Income Transfers in the US - A Framework for the Evaluation of Policy Reforms

Listed author(s):
  • Siassi, Nawid
  • Ortigueira, Salvador

In this paper, we present a dynamic model of labor supply, consumption, savings and marital decisions where we embed the income tax schedule and the four main anti-poverty income transfer programs in the U.S. The model is calibrated to match moments from a sample of non-college-educated workers with children in the 2014 Annual Social and Economic Supplement of the Current Population Survey. We then use the model to assess the effects of three recent proposals to reform the U.S. tax-transfer system, and especially to ameliorate the disincentives introduced by the current EITC schedule to married mothers' labor force participation. The categorical and economic conditions for eligibility and benefits of the transfer programs, along with the income and payroll tax system, yield complex budget constraints and introduce a web of interactions whose effects we aim to understand and quantify.

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File URL: https://www.econstor.eu/bitstream/10419/145665/1/VfS_2016_pid_6617.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2016 (Augsburg): Demographic Change with number 145665.

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Date of creation: 2016
Handle: RePEc:zbw:vfsc16:145665
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Chris Herbst, 2011. "The Impact of the Earned Income Tax Credit on Marriage and Divorce: Evidence from Flow Data," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 30(1), pages 101-128, February.
  2. Mickey Hepner & W. Robert Reed, 2004. "The Effect of Welfare on Work and Marriage: A View from the States," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 349-370, Fall.
  3. Marc K. Chan, 2013. "A Dynamic Model of Welfare Reform," Econometrica, Econometric Society, vol. 81(3), pages 941-1001, 05.
  4. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
  5. Dan T. Rosenbaum, 2000. "Taxes, the Earned Income Tax Credit, and Marital Status," JCPR Working Papers 177, Northwestern University/University of Chicago Joint Center for Poverty Research.
  6. Gregory Acs & Sandi Nelson, 2004. "Changes in living arrangements during the late 1990s: Do welfare policies matter?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(2), pages 273-290.
  7. Hoynes, Hilary Williamson & Schanzenbach, Diane Whitmore, 2012. "Work incentives and the Food Stamp Program," Journal of Public Economics, Elsevier, vol. 96(1), pages 151-162.
  8. repec:cto:journl:v:24:y:2004:i:3:p: is not listed on IDEAS
  9. Christopher A. Swann, 2005. "Welfare Reform When Recipients Are Forward-Looking," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
  10. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  11. Jesse Rothstein, 2010. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 177-208, February.
  12. Raj Chetty & John N. Friedman & Emmanuel Saez, 2013. "Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings," American Economic Review, American Economic Association, vol. 103(7), pages 2683-2721, December.
  13. James Alm & Stacy Dickert-Conlin & Leslie A. Whittington, 1999. "Policy Watch: The Marriage Penalty," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 193-204, Summer.
  14. Jesse Rothstein, 2005. "The Mid-1990s EITC Expansion: Aggregate Labor Supply Effects and Economic Incidence," Working Papers 883, Princeton University, Department of Economics, Industrial Relations Section..
  15. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  16. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  17. Jesse Rothstein, 2005. "The Mid-1990s EITC Expansion: Aggregate Labor Supply Effects and Economic Incidence," Working Papers 883, Princeton University, Department of Economics, Industrial Relations Section..
  18. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2006. "Welfare Reform and Children's Living Arrangements," Journal of Human Resources, University of Wisconsin Press, vol. 41(1).
  19. Lin, Emily Y. & Tong, Patricia K., 2012. "Marriage and Taxes: What Can We Learn From Tax Returns Filed by Cohabiting Couples?," National Tax Journal, National Tax Association, vol. 65(4), pages 807-826, December.
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