Thursday, November 6, 2014
Taos (Convention Center)
*Names in bold indicate Presenter
This paper provides the first evidence on the relationship between timing of income payments and employment of low-income families in a developed-country context. In particular, I exploit large and anticipated income change in the first quarter of calendar year induced by the Earned Income Tax Credit (EITC) to identify the effect of income receipt on employment of low-income families. I conduct triple differences estimation by using comparison groups to purge any shocks to employment that are unrelated to the EITC around the timing of credit receipt. My result suggests the employment of married women is sensitive to the timing of EITC receipt. Receiving 1,000 USD EITC payment could significantly reduce the employment rate of married women, by 1.6 percentage points (baseline is 47 percent), during EITC disbursement months. However, married men and single women do not reveal such employment patterns. The subgroup analysis suggests that married women from liquidity-constrained families, such as those with zero liquid assets, high loan-to-value ratios for housing, or low educational attainments, exhibit a larger negative employment response to the EITC payments than ones from less constrained families.