Association for Public Policy Analysis & Management

A large literature explores the impact of early Earned Income Tax Credit (EITC) expansions on labor force participation, but in general remains silent about mechanisms through which participation adjusts. Exploiting the short panel nature of the Current Population Survey, I explore the impact of early EITC expansions on short-run employment, entry, exit, and job continuation decisions and find that, within individual, employment and continuing employment increased in response to increases in the maximum EITC refund received in a given year, suggesting labor force attachment increased, although the impacts on entry and exit are imprecisely estimated. During the period of the earliest expansions there is also a significant reduction in exit in March, when many recipients would receive EITC refunds, suggesting that single women responded to the EITC ex post by postponing exit and increasing labor force attachment.