Full Citation
Title: Who Does the Earned Income Tax Credit Benefit? A Monopsony View
Citation Type: Working Paper
Publication Year: 2021
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: The Earned Income Tax Credit (EITC) targets refundable tax credits to low-income workers, incentivizing labor supply and raising the incomes of tens of millions of Americans. One possible consequence of subsidizing low-wage work, however, is to reduce wage growth. A monopsony model of the EITC is developed in order to analyze its impacts on labor market outcomes, which are identified by exploiting variation in state EITC supplements. A first set of results focused on the food service industry find that the EITC increases employment and reduces turnover among young women. Further results suggest that the EITC reduces wages for workers without college degrees. These findings prompt a reconsideration of the redistributive effects of the EITC, particularly for groups like older low-wage workers who face slower wage growth as a result of the policy but do not receive the same level of benefits on average.
User Submitted?: No
Authors: Davis, Owen; Farmand, Aida
Series Title: 2021
Publication Number: 2
Institution: The New School for Social Research
Pages: 1-46
Publisher Location: New York
Data Collections: IPUMS CPS
Topics: Education, Gender, Labor Force and Occupational Structure, Poverty and Welfare
Countries: