Download this Paper Open PDF in Browser

Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers

70 Pages Posted: 16 Mar 2000 Last revised: 14 Oct 2010

Bruce D. Meyer

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; National Bureau of Economic Research (NBER)

Dan T. Rosenbaum

University of North Carolina (UNC) at Greensboro - Department of Economics

Date Written: September 1999

Abstract

During 1984-96, welfare and tax policy changed dramatically. The Earned Income Tax Credit was expanded, welfare benefits were cut, welfare time limits were added and cases were terminated, Medicaid for the working poor was expanded, training programs were redirected, and subsidized or free child care was expanded. Many of the program changes were intended to encourage low income women to work. During this same time period there were unprecedented increases in the employment and hours of single mothers, particularly those with young children. In this paper, we first document these large changes in policies and employment. We then examine if the policy changes are the reason for the large increases in single mothers' labor supply. We find evidence that a large share of the increase in work by single mothers can be attributed to the EITC, with smaller shares for welfare benefit reductions, welfare waivers, changes in training programs, and child care expansions. We also find that most of these policies increased hours worked. Our results indicate that financial incentives through the tax and welfare systems have substantial effects on single mothers' labor supply decisions.

Suggested Citation

Meyer, Bruce D. and Rosenbaum, Dan T., Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers (September 1999). NBER Working Paper No. w7363. Available at SSRN: https://ssrn.com/abstract=194649

Bruce D. Meyer (Contact Author)

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States
(773) 702-2712 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dan T. Rosenbaum

University of North Carolina (UNC) at Greensboro - Department of Economics ( email )

Box 26165
Greensboro, NC 27402-6165
United States
336-334-4872 (Phone)
336- 334-4089 (Fax)

Paper statistics

Downloads
71
Rank
277,623
Abstract Views
1,555