Effects of the 2021 Expanded Child Tax Credit

37 Pages Posted: 3 Mar 2022 Last revised: 22 Jun 2022

See all articles by Ben Lourie

Ben Lourie

University of California, Irvine

Devin M. Shanthikumar

University of California, Irvine - Paul Merage School of Business

Terry J. Shevlin

University of California-Irvine; University of California-Irvine

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business

Date Written: April 4, 2022

Abstract

We examine the effects of the July 2021 expansion of the Child Tax Credit (CTC). We analyze detailed transactions data for 2019 through September 2021, utilizing a difference-in-differences design, and controlling for state-time specific conditions. We find that recipients of expanded CTC monthly payments do not significantly leave the workforce. They increase their total consumption, including increasing spending on groceries, education, and healthcare. Families put more money towards reducing debt, and incur fewer overdraft fees. We find weaker results regarding savings and payments towards debt collection agencies. The consumption effects of the expanded CTC are strongest for families with more children, and for the lowest-income families. Our results provide large-scale empirical evidence on the realized effects of the 2021 changes to the CTC, and suggest that families significantly benefited from the expanded CTC payments, without significant costs to employment.

Keywords: child tax credit, household finance, employment, consumption, debt, savings, financial distress

JEL Classification: D12, D14, G5, H24, M48

Suggested Citation

Lourie, Ben and Shanthikumar, Devin M. and Shevlin, Terry J. and Shevlin, Terry J. and Zhu, Chenqi, Effects of the 2021 Expanded Child Tax Credit (April 4, 2022). Available at SSRN: https://ssrn.com/abstract=3990385 or http://dx.doi.org/10.2139/ssrn.3990385

Ben Lourie (Contact Author)

University of California, Irvine ( email )

Irvine, CA 92697-3125
United States

Devin M. Shanthikumar

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
SB2 428
Irvine, CA 92697-3125
United States

Terry J. Shevlin

University of California-Irvine ( email )

Paul Merage School of Business
Irvine, CA 92697-3125
United States
949-824-6149 (Phone)

University of California-Irvine ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
2065509891 (Phone)

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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