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Stepping Stone or Dead End? The Effect of the EITC on Earnings Growth

33 Pages Posted: 13 May 2009  

Molly Dahl

Government of the United States of America - Congressional Budget Office (CBO)

Thomas DeLeire

Georgetown University; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jonathan A. Schwabish

Urban Institute

Abstract

While many studies have found that the EITC increases the employment rates of single mothers, no study to date has examined whether the jobs taken by single mothers as a result of the EITC incentives are dead-end jobs or jobs that have the potential for earnings growth. Using a panel of administrative earnings data linked to nationally representative survey data, we find no evidence that the EITC expansions between 1994 and 1996 induced single mothers to take dead-end jobs. If anything, the increase in earnings growth during the mid-to-late 1990s for single mothers who were particularly affected by the EITC expansion was higher than it was for other similar women. The EITC encourages work among single mothers, and that work continues to pay off through future increases in earnings.

Keywords: earned income tax credit, earnings, single mothers

JEL Classification: J3, H2

Suggested Citation

Dahl, Molly and DeLeire, Thomas and Schwabish, Jonathan A., Stepping Stone or Dead End? The Effect of the EITC on Earnings Growth. IZA Discussion Paper No. 4146. Available at SSRN: https://ssrn.com/abstract=1402086

Molly Dahl (Contact Author)

Government of the United States of America - Congressional Budget Office (CBO) ( email )

Ford House Office Building
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Washington, DC 20515-6925
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Thomas DeLeire

Georgetown University ( email )

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National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jonathan A. Schwabish

Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

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