New Research on the Effects of EITC and SNAP
(Poverty and Income Policy)
Saturday, November 14, 2015: 8:30 AM-10:00 AM
Zamora (Hyatt Regency Miami)
*Names in bold indicate Presenter
Panel Organizers: Sean Higgins, University of California, Berkeley
Panel Chairs: Bradley Hardy, American University
Discussants: Megan E. Hatch, Cleveland State University
The Earned Income Tax Credit (EITC) and Supplemental Nutrition and Assistance Program (SNAP) are the largest transfer programs in the United States. Both programs cause significant reductions in poverty, and were extremely responsive to the recession. The EITC has been shown to increase labor force participation, intergenerational mobility, test scores, and infant health, with a larger improvement for blacks in some of these outcomes. SNAP has been found to increase overall consumption, reduce out-of-pocket food expenditures, and improve infant health. In this panel, we present new research on these two government programs using sources of variation not yet exploited in the literature.
The two papers on the EITC exploit year-to-year variation in state-level EITC programs, a source of variation that has not been exploited in the literature. The first, “Estimating the Economic Impact of State-Level Earned Income Tax Credits,” examines the causal effect of state-level EITC payments on local economies and specific sectors within these economies, exploiting variation in state EITC policy in metropolitan areas that span more than one state. It finds that state EITCs do have local economic impacts, but not in all dimensions of the local economy nor in every industry.
The second, “The Impact of Government Cash Transfers on Birthweight: New Evidence from State Earned Income Tax Credits,” updates existing estimates of the impact of the EITC on birthweight, exploiting a novel and more recent source of variation than the previous literature. Existing studies on the impacts of the EITC on birthweight, like previous studies on impacts of the EITC on other dimensions such as labor supply, exploit the 1993 EITC expansion that greatly increased benefits available to low-income mothers with two children, but hardly increased benefits for mothers with one child. By exploiting variation in the timing and generosity of state-level refundable tax credits—with some states increasing the generosity of their EITCs as recently as the last couple few years—this paper provides more recent estimates of the impact of EITC on birthweight.
The third paper, “Are Household Food Expenditures Responsive to Entry Onto the Supplemental Nutrition Assistance Program,” uses month-by-month panel data on consumption and SNAP participation to estimate the impact of SNAP entry on food insecurity. It finds that households enter SNAP concurrently with household shocks, such as unemployment or divorce, and that relative to households facing these shocks without entering SNAP, the program shields new entrants from a substantial fall in food expenditures and increase in food insecurity.