Panel Paper: The Effects of the Earned Income Tax Credit On Child Achievement and Long Term Educational Attainment

Friday, November 8, 2013 : 1:35 PM
3017 Monroe (Washington Marriott)

*Names in bold indicate Presenter

Michelle Maxfield, Michigan State University
The Earned Income Tax Credit (EITC) has been a significant source of government aid to poor families since its start in 1975, with total aid reaching over $50 billion in 2008. Despite its size and pro-child goals, relatively little is known on how the EITC affects children directly. Until recently, studies have focused only on indirect measures of child well-being such as poverty, parental labor supply, marriage, fertility, and consumption. A few recent studies focus on the effects of the EITC on child and infant health, but other outcomes have not yet been explored. Without knowing the direct impact of the EITC on children, it is difficult to accurately assess the performance of the program. Taking advantage of tax changes in the 1990s which resulted in a large differential expansion in the EITC by number of children, I assess how an expansion in the EITC affects children’s cognitive, noncognitive, and health outcomes as well as the mechanisms behind these effects. Preliminary results using the National Longitudinal Survey of Youth suggest that home resources change significantly for children with single mothers – most notably an increase in maternal labor force participation, reduction in welfare receipt, a substitution away from maternal care to child care by distant relatives or non-relatives in a home setting, and a substitution of child insurance from Medicaid to private insurance. I find early evidence that the credit improves math scores for all children and decreases behavioral issues for children with married mothers. Timing and duration of effects are explored as well as differential effects by age of the child.