The EITC and the Extensive Margin: A Reappraisal

Henrik Kleven

No 26405, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A strong consensus posits that the Earned Income Tax Credit (EITC) has had sizable effects on extensive margin labor supply, especially for single mothers. This paper reappraises the difference-in-differences and event study approaches that underpin much of this consensus. The paper investigates every EITC reform at the state and federal level since the inception of the policy. All reforms are analyzed in an event study framework and a comprehensive analysis of model uncertainty is presented. Apart from the federal 1993 reform, EITC expansions are not associated with any clear and robust effects on employment. Treatment impact estimates from about 500 event studies are symmetrically distributed around zero. Specifications with large elasticities are outliers in the distribution. The 1993 reform, on the other hand, is associated with large employment increases for single mothers. Based on a number of different analyses, the paper shows that these increases align more closely with confounding effects from welfare reform and the macroeconomy than with the EITC. Overall, difference-in-differences and event study analyses of EITC reforms are fragile to specification choices and do not support robustly large effects.

JEL-codes: H20 H24 H31 J20 J21 J22 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-lma, nep-pbe and nep-pub
Note: EFG LS PE
References: Add references at CitEc
Citations: View citations in EconPapers (42)

Published as Henrik Kleven, 2024. "The EITC and the extensive margin: A reappraisal," Journal of Public Economics, vol 236.

Downloads: (external link)
http://www.nber.org/papers/w26405.pdf (application/pdf)

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:nbr:nberwo:26405

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26405

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().