The Long-Term Impact of the Earned Income Tax Credit on Children's Education and Employment Outcomes

58 Pages Posted: 17 Oct 2015 Last revised: 3 Jan 2017

Jacob Bastian

University of Michigan at Ann Arbor

Katherine Michelmore

University of Michigan at Ann Arbor; Syracuse University

Date Written: December 27, 2016

Abstract

Using four decades of variation in the federal and state Earned Income Tax Credit, we estimate the impact of the EITC on education and employment outcomes on children exposed to EITC expansions in childhood. Reduced-form results suggest that an additional $1,000 in EITC exposure when a child is 13 to 18 years old increases the likelihood of completing high school (1.3 percent), completing college (4.2 percent), being employed as a young adult (1.0 percent), and earnings by 2.2 percent. Instrumental variables analysis reveals that the primarily channel through which the EITC improves education and employment outcomes among children is through increases in pre-tax family income.

Keywords: earned income tax credit, educational attainment, intergenerational mobility

JEL Classification: H2, I2, I3

Suggested Citation

Bastian, Jacob and Michelmore, Katherine, The Long-Term Impact of the Earned Income Tax Credit on Children's Education and Employment Outcomes (December 27, 2016). Available at SSRN: https://ssrn.com/abstract=2674603

Jacob Bastian

University of Michigan at Ann Arbor ( email )

119 Lorch Hall
611 Tappan Ave
Ann Arbor, MI 48109
United States

Katherine Michelmore (Contact Author)

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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