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Title: How Does the Earned Income Tax Credit Work? Exploring the Role of Commuting and Personal Transportation
Citation Type: Miscellaneous
Publication Year: 2023
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Abstract: Although the Earned Income Tax Credit is one of the largest and most extensively studied programs affecting low-income workers in the U.S., relatively little is known about its mechanisms. Motivated by a wealth of prior sociological and survey research showing EITC recipients devote a substantial share of tax refunds to purchasing and maintaining vehicles necessary for job search and commuting, this study examines the personal transportation pathway. I use a simulated instrument approach leveraging metro-level variation in EITC exposure to compare labor-supply responses to policy changes between areas with varying levels of dependence on cars for commuting workers. The main results, robust to a range of specifications, give strong support to the transportation mechanism: employment effects are 18% smaller in cities with abundant public transportation and 16% larger in highly car-dependent areas. These results are tempered, however, by supplemental analyses into the seasonality of estimated EITC responses and respondents' reports of transportation difficulties. The paper also presents new evidence using the simulated instrument approach to address two outstanding questions in the literature: the effects of state EITC supplements and the impact of the 2009 EITC expansion.
Url: https://ofdavis.com/eitc.pdf
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Authors: Davis, Owen
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Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure
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