State Child Tax Credits and Parental Labor Supply: Evidence from Staggered Adoption

Justin White (), Ziyue Xu (), Rita Hamad () and Zachary Parolin ()
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Justin White: Boston University
Ziyue Xu: Boston University
Rita Hamad: Harvard T.H. Chan School of Public Health
Zachary Parolin: University of Oxford

No 19046, IZA Discussion Papers from IZA Network @ LISER

Abstract: States increasingly supplement the federal Child Tax Credit (CTC) with credits that vary in generosity, refundability, and earnings requirements. We examine changes in parental employment, labor force participation, and work hours following state CTC adoption using the CPS ASEC, 2004–2026. Our preferred stacked difference-in-differences design includes 12 adopting states with complete event-time support and compares them with never-treated states and states that adopted after our evaluation window. Averaging over the first three post-adoption survey years, the estimated effect is 0.05 percentage points (SE 1.03) for employment and −0.46 points (0.82) for labor force participation; estimates for work hours are also close to zero. Across secondary specifications, extensive-margin estimates were similarly small. Larger simulated benefits are associated with fewer hours among employed parents, but the relationship is also evident before adoption and may partly reflect how benefits depend on earnings. Overall, the estimates provide little indication that state CTC adoption has substantially reduced parental employment, although meaningful effects in either direction cannot be ruled out under moderate departures from parallel trends.

Keywords: Child Tax Credit; labor supply; employment; state policy; difference-in-differences; tax credits (search for similar items in EconPapers)
JEL-codes: H24 H75 I38 J22 (search for similar items in EconPapers)
Date: 2026-10
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