Income, the Earned Income Tax Credit, and Infant Health
48 Pages Posted: 7 Jul 2012 Last revised: 12 Jul 2012
Date Written: July 2012
This paper evaluates the health impact of a central piece in the U.S. safety net for families with children: the Earned Income Tax Credit. Using tax-reform induced variation in the federal EITC, we examine the impact of the credit on infant health outcomes. We find that increased EITC income reduces the incidence of low birth weight and increases mean birth weight. For single low education (<= 12 years) mothers, a policy-induced treatment on the treated increase of $1000 in EITC income is associated with 6.7 to 10.8% reduction in the low birth weight rate, with larger impacts for births to African American mothers. These impacts are evident with difference-in-difference models and event study analyses. Our results suggest that part of the mechanism for this improvement in birth outcomes is the result of more prenatal care and less negative health behaviors (smoking). We find little role for changes in health insurance. We contribute to the literature by establishing that an exogenous increase in income can improve health, and illustrating a health impact of a non-health program. More generally, we demonstrate the potential for positive external benefits of the social safety net.
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