Working Paper: NBER ID: w7599
Authors: David Neumark; William Wascher
Abstract: This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.
Keywords: EITC; Minimum Wage; Poverty; Labor Market
JEL Codes: J39; I32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EITC (H26) | earned income (J31) |
| EITC (H26) | poverty transitions (I32) |
| EITC (H26) | labor market entry (J48) |
| minimum wage (J38) | earned income (J31) |
| minimum wage (J38) | poverty transitions (I32) |
| EITC (H26) | income for families with children (J13) |
| minimum wage (J38) | income for families with children (J13) |
| EITC (H26) | overall impact on family income levels (F61) |