Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children

35 Pages Posted: 2 Aug 2005 Last revised: 20 Oct 2021

See all articles by Maria Cancian

Maria Cancian

University of Wisconsin - Madison - Robert M. La Follette School of Public Affairs

Arik Levinson

Georgetown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2005

Abstract

We examine the labor market consequences of the Earned Income Tax Credit (EITC), comparing labor market behavior of eligible parents in Wisconsin, which supplements the federal EITC for families with three children, to that of similar parents in states that do not supplement the federal EITC. Data come from the 2000 Census of Population. Most previous studies have relied on changes in the EITC over time, or EITC eligibility differences for families with and without children, or have extrapolated from measured labor supply responses to other tax and benefit programs, and find significant effects of the EITC on employment. In contrast, our cross-state comparison examines a larger difference in EITC subsidy rates, uses more similar treatment and control groups, relies on a policy that has been in place for 5 years, and finds no effect of the EITC on employment or hours worked.

Suggested Citation

Cancian, Maria and Levinson, Arik M., Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children (July 2005). Available at SSRN: https://ssrn.com/abstract=755691

Maria Cancian

University of Wisconsin - Madison - Robert M. La Follette School of Public Affairs ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States

Arik M. Levinson (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-5571 (Phone)
202-687-6102 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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