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Do In-Work Tax Credits Serve as a Safety Net?

Marianne Bitler (), Hilary Hoynes and Elira Kuka ()

Journal of Human Resources, 2017, vol. 52, issue 2, 319-350

Abstract: We test the EITC’s response to economic need. Using IRS data we exploit differences in timing and severity of economic cycles across states. Because the EITC requires earned income, there is a theoretical ambiguity in the credit’s cyclicality. We find higher unemployment leads to increased likelihood of EITC recipiency and in credit amounts received for married couples but has insignificant effects for single individuals. The EITC’s protective effects are concentrated among skilled workers. The EITC mitigates income shocks for married couples with children and groups likely to have moderate earnings, but does not for most recipients: single parents with children.

Date: 2017
Note: DOI: 10.3368/jhr.52.2.0614-6433R1
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Working Paper: Do In-Work Tax Credits Serve as a Safety Net? (2014) Downloads
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