The Impact of the Earned Income Tax Credit on Household Finances

Lauren E. Jones and Katherine Michelmore

Journal of Policy Analysis and Management, 2018, vol. 37, issue 3, 521-545

Abstract: Using a simulated instrument strategy, we analyze how expansions to the federal and state Earned Income Tax Credits (EITC) affected household finances over the past two decades. Using data from the Survey of Income and Program Participation wealth topical modules, we also test whether responses differ over time, as well as whether there are different responses to the federal and state expansions, and how responses vary by educational attainment. A $1,000 policy†induced increase in the average household EITC leads to a 3 percentage point increase in the likelihood of holding money in a savings or checking account, and approximately $700 more held in savings balances. These results are coupled with large increases in pre†tax family earnings. We also find some evidence of decreases in unsecured debt holdings. We interpret these results as further evidence that the EITC increases the financial stability of low†income single mothers.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://doi.org/10.1002/pam.22062

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jpamgt:v:37:y:2018:i:3:p:521-545

Access Statistics for this article

More articles in Journal of Policy Analysis and Management from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().