Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings

Raj Chetty, John Friedman and Emmanuel Saez

American Economic Review, 2013, vol. 103, issue 7, 2683-2721

Abstract: We estimate the impacts of the Earned Income Tax Credit on labor supply using local variation in knowledge about the EITC schedule. We proxy for EITC knowledge in a Zip code with the fraction of individuals who manipulate reported self-employment income to maximize their EITC refund. This measure varies significantly across areas. We exploit changes in EITC eligibility at the birth of a child to estimate labor supply effects. Individuals in high-knowledge areas change wage earnings sharply to obtain larger EITC refunds relative to those in low-knowledge areas. These responses come primarily from intensive-margin earnings increases in the phase-in region.

JEL-codes: H23 H24 H31 J22 J23 J31 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.7.2683
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Citations: View citations in EconPapers (347)

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Working Paper: Using Differences in Knowledge Across Neighborhoods to Uncover the Impacts of the EITC on Earnings (2012)
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