Impacts of Earned Income Tax Credit on Wages of Ineligible Workers

Aida Farmand

No 2019-04, SCEPA working paper series. from Schwartz Center for Economic Policy Analysis (SCEPA), The New School

Abstract: This paper analyzes the impact of the Earned Income Tax Credit (EITC) pay- ments on labour market behaviors, wages and the tax incidence. The variation in state EITC supplement in the U.S. provides the opportunity to examine the real redistributive impacts of this policy. More specifically, if EITC recipients compete in the same labor markets as others who are ineligible for the credit this can cause wage declines for workers who do not receive off setting EITC payments. Using a fixed effect model that controls for inter-state heterogeneity this study concludes that based on industry from 1991-2017 older (over age 55) ineligible workers who resided in states with more generous EITC benefits saw significantly less wage growth compared to their counterparts that did not reside in states with generous EITC supplements.

Keywords: EITC; wages; bargaining power (search for similar items in EconPapers)
JEL-codes: J50 J58 J59 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:epa:cepawp:2019-04

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