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Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children

Maria Cancian () and Arik Levinson ()

No 11454, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the labor market consequences of the Earned Income Tax Credit (EITC), comparing labor market behavior of eligible parents in Wisconsin, which supplements the federal EITC for families with three children, to that of similar parents in states that do not supplement the federal EITC. Data come from the 2000 Census of Population. Most previous studies have relied on changes in the EITC over time, or EITC eligibility differences for families with and without children, or have extrapolated from measured labor supply responses to other tax and benefit programs, and find significant effects of the EITC on employment. In contrast, our cross-state comparison examines a larger difference in EITC subsidy rates, uses more similar treatment and control groups, relies on a policy that has been in place for 5 years, and finds no effect of the EITC on employment or hours worked.

JEL-codes: H24 H73 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2005-07
Note: LS PE
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Published as Cancian, Maria and Arik Levinson. "Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin's Supplemental Benefit for Families with Three Children." National Tax Journal (December 2006).

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