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Employment Effects of the Earned Income Tax Credit: Taking the Long View (WP-20-52)

Diane Whitmore Schanzenbach and Michael Strain

The Earned Income Tax Credit (EITC) is the cornerstone U.S. anti-poverty program, typically lifting over 5 million children out of poverty each year. Targeted to low-income households with children, and only available to those who work, the EITC contains strong incentives for nonworkers to become employed. Most of the existing economics literature focuses on federal EITC expansions in the 1980s and 1990s. This paper takes a longer view, studying all federal expansions since the program’s inception in 1975. The authors find robust evidence that EITC expansions increase the extensive margin of labor supply.

This paper is published in Tax Policy and the Economy.

Diane Whitmore Schanzenbach, Margaret Walker Alexander Professor of Human Development and Social Policy, IPR Director and Fellow, Northwestern University

Michael Strain, Director, Economic Policy Studies and Arthur F. Burns Scholar in Political Economy, American Enterprise Institute

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