The EITC and the Extensive Margin: A Reappraisal

Abstract

This paper reappraises the impact of the Earned Income Tax Credit (EITC) on labor supply at the extensive margin for single mothers. I investigate every EITC reform at the state and federal level since the inception of the policy. Apart from the federal 1993 reform, EITC expansions have not had any clear and significant effects on employment. The 1993 reform is associated with large employment effects, but these effects align more closely with confounding changes from welfare reform and the macroeconomy than with the EITC. I conduct a comprehensive analysis of the robustness of the EITC null result to model uncertainty.