The Persuasive Role of Information: The Case of EITC Reminding Letters

Abstract

This paper uses data on Earned Income Tax Credit (EITC) reminding letters sent by the Israel Tax Authority to potentially eligible applicants during the period 2008-2011. Using a setup of repeated letters sent to the applicants, we are able to identify whether individuals apply for receiving the EITC as a reaction to the reminding letter. In the framework of a dynamic analysis of learning, we estimate the persuasive role of information at 1.5 percent. Using independently performed questionnaires, we are also able to characterize the letter dependent population, defined as the applicants that depend on receiving letters for requiring the EITC transfer. We found that these applicants are older, they receive a lower transfer, they have a fair knowledge about the program, and they do not actively seek for information on the expected EITC transfer amount. We also found that they have particular cultural characteristics: the representation of ultraorthodox applicants is higher than their percent in the population, they have problems with fluency in languages including Hebrew and the percent of households with two earners is low.