There is no conflict of interest.
Citation
Kuka, E., & Shenhav, N. (2020). Long-run effects of incentivizing work after childbirth. (No. w27444). National Bureau of Economic Research. https://doi.org/10.3386/w27444
Highlights
- The study's objective was to examine the impact of changes in the Earned Income Tax Credit (EITC) on employment and earnings outcomes.
- The study used a difference-in-differences design and matched data from the Social Security Administration (SSA) to the U.S. Census’ Current Population Survey (CPS). The authors used statistical models to compare the outcomes of never-married mothers with a first child born before and after the EITC policy change.
- The study found that never-married mothers exposed to the EITC early (immediately after birth) had significantly higher employment rates and earnings than never-married mothers exposed to the EITC later (3 to 6 years after birth).
- This study receives a moderate evidence rating. This means we are somewhat confident that the estimated effects are attributable to the Earned Income Tax Credit (EITC), but other factors might also have contributed.
Intervention Examined
1993 Earned Income Tax Credit (EITC) expansion
Features of the Intervention
The Earned Income Tax Credit (EITC) was expanded to cover more households by lowering the income limit and increasing the benefits. Changes made in 1993, which took effect in 1994, raised the maximum credit for families and lowered the income needed to qualify, allowing more households to participate. The EITC is claimed when tax returns are filed. While low-income households without children can qualify, the majority of the dollars go to single (75%) or married (20%) women with children. The amount of the refund depends on the number of eligible children and household earnings. To be eligible, children must reside in the house at least half of the year, be 18 or younger (or 24 or younger if they are in enrolled in school full time), or be permanently disabled.
Features of the Study
The study used a difference-in-differences design to compare outcomes between never-married mothers in two cohorts: (1) those who had their first child between 1993 and 1996 (early-exposed cohort), and (2) those who had their first child between 1988 and 1991 (late-exposed cohort). Mothers in the early-exposed cohort had a child born shortly after the EITC was expanded whereas mothers in the late-exposed cohort would have benefited from the EITC expansion three to six years after having a child.
The study sample included 11,291 never-married women under 50 years of age who had their first child at 19 years of age or older between 1988 and 1991 or between 1993 and 1996. The study matched data from the Social Security Administration (SSA) to the Current Population Survey (CPS). Mothers' earnings and children's birthdates were obtained from SSA for the years 1978 to 2015. Demographic information was obtained from the March CPS in 1991, 1994, and 1996 to 2016. The authors used statistical models to compare the outcomes of mothers in the early-exposed cohort to mothers in the late-exposed cohort. The study examined employment and earnings outcomes in the short-run (within 4 years of giving birth), medium-run (5 to 9 years after giving birth), and long-run (10 or more years after giving birth).
Findings
Employment
- The study found that the employment rate of never-married mothers in the early-exposed cohort was significantly higher than those in the late-exposed cohort in both the short-run and medium-run.
- However, the study did not find significant differences in employment rates between the cohorts in the long-run.
Earnings and wages
- The study found that the earnings of never-married mothers in the early-exposed cohort was significantly higher than those in the late-exposed cohort at all time points.
Considerations for Interpreting the Findings
The authors employed the same early-exposed and late-exposed cohort to examine the outcomes of married mothers. However, those findings are not presented in this profile as the primary findings of the study pertain to never-married mothers.
Causal Evidence Rating
The quality of causal evidence presented in this report is moderate because it was based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the EITC, but other factors might also have contributed.