Income Effects in Labor Supply: Evidence from Child-Related Tax Benefit

51 Pages Posted: 11 May 2016

See all articles by Philippe Wingender

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department

Sara LaLumia

Williams College - Department of Economics

Date Written: May 1, 2016

Abstract

A parent whose child is born in December can claim child-related tax benefits when she files her tax return a few months later. Parents of children born in January must wait more than a year before they can receive child-related tax benefits. As a result, families with December births have higher after-tax income in the first year of a child's life than otherwise similar families with January births. This paper estimates the corresponding income effect on maternal labor supply, testing whether mothers who give birth in December work and earn less in the months following birth. We use data from the American Community Survey, the Survey of Income and Program Participation, and the 2000 Decennial Census. We find that December mothers have a lower probability of working, particularly in the third month after a child's birth. Earnings data from the SIPP indicate that an additional dollar of child-related tax benefits reduces annual maternal earnings in the year following a child's birth by approximately one dollar.

Suggested Citation

Wingender, Philippe and LaLumia, Sara, Income Effects in Labor Supply: Evidence from Child-Related Tax Benefit (May 1, 2016). US Census Bureau Center for Economic Studies Paper No. CES-WP-16-24, Available at SSRN: https://ssrn.com/abstract=2777594 or http://dx.doi.org/10.2139/ssrn.2777594

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States
202-623-9831 (Phone)
202-623-4199 (Fax)

Sara LaLumia (Contact Author)

Williams College - Department of Economics ( email )

Fernald House
Williamstown, MA 01267
United States

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