Taxation and Labor Force Participation: The EITC Reconsideredsaez/course131/KlevenEITCSlides.pdf ·...

Taxation and Labor Force Participation:The EITC Reconsidered

Henrik Kleven

Princeton University and NBER

October 2018

The Extensive Margin of Labor Supply

I A consensus view that extensive margin responses are largerthan intensive margin responses

I Where does this consensus originate from?

I Early labor supply literature (Heckman 1993)

I Macro business cycle literature (Hansen 1985; Rogerson 1988)

I Labor supply literature studying EITC reform(Eissa & Liebman 1996; Meyer & Rosenbaum 2001)

I A meta study by Chetty et al. (2013) puts the extensive marginelasticity at around 0.3

2 / 167

The Earned Income Tax Credit (EITC)

I A means-tested transfer that is conditional on positive earningsand children

I A large literature studies the labor supply effects of the EITC,particularly on single mothers

I Most of this work exploits federal EITC expansions enacted in1986, 1990, and 1993

I Nichols & Rothstein (2015) summarize the consensus view:

There is remarkable consensus around a few key results (...)essentially all authors agree that the EITC expansion led tosizeable increases in single mothers’ employment rates

3 / 167

Literature

I Labor market impacts of the EITC:

Dickert, Houser & Scholz (1995), Eissa & Liebman (1996), Ellwood (2000),Meyer & Rosenbaum (2001), Neumark & Wascher (2001), Hotz & Scholz(2003), Grogger (2003), Eissa & Hoynes (2004, 2006, 2011), Cancian &Levinson (2005), Hotz, Mullin & Scholz (2006), Hoynes (2009), Rothstein(2010), Gelber & Mitchell (2012), Chetty, Friedman & Saez (2013), Looney &Manoli (2013), Bastian (2018)

I Labor market impacts of the FC/WFTC/WTC:

Blundell et al. (2000), Blundell & Hoynes (2004), Blundell, Brewer &Shepard (2005), Brewer et al. (2006), Leigh (2007), Francesconi & Klauw(2007), Francesconi, Rainer & Klaauw (2009), Gregg, Harkness & Smith(2009), Blundell et al. (2016)

4 / 167

Why Revisit This Question?

I Have I found a new source of identifying variation? (NO)

I I study EITC reforms in the US (federal and state)

I I study WFTC/WTC reforms in the UK

I Have I gained access to better data? (NO)

I I use CPS data for the US and LFS/BHPS data for the UK

I So I study the same data and reforms, but viewed through adifferent lens

I The consensus view is based on work from about 20 years ago

5 / 167

In-Work Transfers in the US and UK

6 / 167

EITC Schedule in 2017

0 children

1 child

2 children

3+ children

0 10000 20000 30000 40000 50000 60000Earnings (USD)

7 / 167

EITC Maximum Credit Over Time

0 children

1 child

2 children

3+ children

Tax ReductionAct of 1975 TRA86 OBRA90 OBRA93 ARRA

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

8 / 167

EITC vs WTC Schedules in 2017Single Women with 1 Child

0 10000 20000 30000 40000 50000 60000Earnings (USD)

EITCWTC w/ childcare subsidyWTC, w/o childcare subsidy

2 Children9 / 167

WTC Maximum Credit Over Time

3 children

1 child

2 children

0 children

FIS FC WFTC WTC

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

With Child Tax Credit

10 / 167

EITC Effects on the Extensive Margin?

11 / 167

I Current Population Survey (CPS), March filesI 50-year period (1968-2018)I From around 150,000 to 200,000 individuals per year

I Measures of extensive margin labor supply:

1. Employed last week

2. Participated last weekI Employed or unemployed last week

3. Employed last yearI Positive earnings last year

4. Participated last yearI Employed or unemployed for 1+ weeks last year

Extensive Margin Measures

12 / 167

Labor Force Participation of Single WomenWith and Without Children

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

With Children Without Children

Annual Employment Low Education13 / 167

50 years of relative stability,apart from these 5 years

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

14.5pp

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Tax ReductionAct of 1975 TRA86 OBRA90 OBRA93 ARRAPRWORA

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

State WelfareWaivers

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

With Children Without Children Unemployment

Labor Force Participation of Single WomenBy Number of Children

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

0 children 1 child 2 children 3+ children

Much larger increaseby those with 3+ kids40

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

But no increase hereby those with 3+ kids

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

And no increasehere either

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Annual Employment Low Education Skip Married23 / 167

Labor Force Participation of Married WomenWith and Without Children

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Annual Employment Low Education 24 / 167

Labor Force Participation of Married WomenWith and Without Children (Spousal Earnings Below First Kink)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Annual Employment Low Education Above Kink 25 / 167

Labor Force Participation of Married WomenSpousal Earnings Below and Above First Kink (Conditional on Children)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Spousal Earnings Below Kink Spousal Earnings Above Kink

Annual Employment Low Education 26 / 167

Red Flags

The participation increase for single mothers in 1994-99 is massiveand follows the 1993 EITC reform, but...

I How do we separate EITC effects from the key confounders?

I Why do those with 3+ kids increase participation so muchmore than those with 2 kids after 1993 (but not elsewhere)?

I Why are there no visible effects for married women?

I Why are there no visible effects of the 1975, 1986, 1990, and2009 reforms?

I It is difficult to reconcile the patterns with optimization friction

1993 Reform

27 / 167

Effect of the 1975 Reform

1993 Reform28 / 167

Tax ReductionAct of 1975

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Labor Force Participation of Single WomenDiD: Difference Between Those With and Without Children

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

1975 Reform: Conclusions

I No extensive margin effects for single women

I Business cycle variation that coincides with the reform

I This mainly affects the earnings-based measure of participation→ illusory short-term effect of the EITC

I No extensive margin effects for married women eitherMarried Women

I Reconciling these conclusions with Bastian (2018)

I Confounding effects of business cycles (single women) andsecular trends (married women) that vary by children

Bastian (2018)

32 / 167

Effect of the 1993 Reform

1975 Reform33 / 167

Empirical Specification

DiD specification:

Pist =∑j

αj · Y earj=t + β ·Kidsi +∑j

γj · Y earj=t ·Kidsi

δkj · Y earj=t ·W ksj +

ζkj · Y earj=t ·Kidsi ·W ksj

+η · Ust + θ · Ust ·Kidsi + νist

where W kst is an indicator for state s having waiver type k in year t

and Ust is the unemployment rate in state s in year t

I Six welfare waivers: termination time limits, work-requirementtime limits, family caps, JOBS exemptions, JOBS sanctions,and earnings disregards

34 / 167

DiD specification:

Pist =∑j

35 / 167

DiD specification:

Pist =∑j

36 / 167

OBRA93TRA86 OBRA90 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Annual Participation Weekly Employment Annual Employment Low Education With 1 and 2+ Children37 / 167

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Controlling for State Unemployment)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Raw Means With Controls

(Controlling for State Unemployment and Welfare Waivers)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Annual Participation Weekly Employment Annual Employment Low Education With 1 and 2+ Children

Any Waiver Approved Any Waiver Implemented 40 / 167

1993 Reform: Conclusions

I The participation increase for single mothers is correlated withunemployment changes and welfare waivers across states

I Controlling for state-level variation in unemployment andwelfare waivers eliminates any significant effect of the EITCbetween 1994-96 (prior to PRWORA)

I A weak test as it absorbs only cross-state effects, not anynational effects

I The drivers of the 1990s participation boom are unidentified,but the patterns are consistent with no effect of the EITC

41 / 167

State EITC Supplements

WFTC 42 / 167

State EITC Supplements

I Between 1984-2018, many states instituted EITC supplements

I 28 states currently have EITC supplements

I Many supplements are small or were increased only gradually

I Some states implemented larger reforms

I Define “large reform” as an increase in the state EITC of atleast 20% (refundable) of the federal credit within 3 years

I 8 states had such reforms

43 / 167

States with an EITC Supplement in 1990

Any SupplementNo Supplement

44 / 167

45 / 167

46 / 167

47 / 167

Large ReformAny SupplementNo Supplement

48 / 167

Synthetic Control Approach

I For each state with an EITC supplement, a synthetic controlstate is created from those without a supplement

I I focus on state reforms:

I Introduction of any state EITC supplement

I Large reforms, as defined earlier

I I match on pre-reform variables:

I Labor force participation (level and trend), unemployment rate(level and change), and welfare participation rate

Synthetic States

49 / 167

Specification

DiD specification:

Pst =∑j

αj · Eventj=t + β · Treats +∑j

γj · Eventj=t · Treats

+λs + νst

where Eventj=t are event time indicators, Treats is an indicator forbeing a treatment state, and λs is a state fixed effect

I The specification is run on an unbalanced panel of states overan event window from -10 to +10

50 / 167

Large State EITC Reforms: Event StudyTreatment and Synthetic Control States

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

Treatments Synthetic Controls

All Reforms Annual Participation Weekly Employment Annual Employment

51 / 167

Large State EITC Reforms: Event StudyDiD: Difference Between Treatment and Synthetic Control States

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

Placebos All Reforms Annual Participation Weekly Employment Annual Employment

52 / 167

State EITC Supplements: Conclusions

I State EITCs create variation that does not rely on children

I This avoids confounders that vary by children

I But introduces confounders that vary by state→ synthetic control approach

I Most state EITC reforms have been too small for a credibleDiD, but 8 reforms were sizeable

I Evidence from large state EITC reforms:

I No clear evidence of any extensive margin effects

53 / 167

WFTC Effects on the Extensive Margin?

54 / 167

I Main data: Labour Force Survey (LFS):

I Repeated cross-section

I 1992-2017

I Around 400,000 individuals per year

I Alternate data: British Household Panel Survey (BHPS):

I Panel

I 1991-2008

I Started with 10,000 individuals in 1991

55 / 167

DiD specification:

Pirt =∑j

+δ · Urt + ζ · Urt ·Kidsi +Xi · φ+Xi ·Kidsi · ψ + νirt

where Urt is the unemployment rate in region r in year t, and Xi

includes dummies for age, age of youngest child, and education

I Allow for linear, group-specific pre-trend, i.e. residualize Pirt

using linear trend estimated on pre-data

56 / 167

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

Low Education Employment (All Edu) Employment (Low Edu)57 / 167

(Normalized)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Adding Linear Pre-Trends)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

Raw Means With Pre-Trends

(Controlling for Unemployment and Demographics)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Adding Pre-Trend Controls)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

Raw Means With Controls & Pre-Trends

1999 WFTC Reform: Findings and Issues

I The real size of the 1999 WFTC expansion:

I The WFTC expansion was massive in itself, but there wereoffsetting changes from the welfare system

I Still, a sizeable net incentive for the typical single mother(e.g., Blundell & Hoynes 2004)

I The effects on the extensive margin of labor supply:

I No effects on labor force participation

I This holds in both LFS and BHPS BHPS

I Suggestive effects on employment

I DiD effect driven by break in the control group → parallel trendassumption is tenuous

63 / 167

Conclusions

64 / 167

Where Does This Leave Us?

I A consensus view that participation responses can be sizeableI This view is partly grounded in EITC studies

I But no study identifies these responses to a modern bar

I Cross-country puzzle (Kleven 2014)

I Revisiting historical EITC and WFTC reforms, I find no clearevidence of participation responses

I What happened with single mothers in the US in the 1990s?I Maybe a unique combination of EITC reform, welfare reform,

economic upturn, and changing social norms?

I Economic history rather than anything externally valid

65 / 167

Appendix

66 / 167

WTC Maximum Credit Over TimeSingle Women with 2 Children

0 10000 20000 30000 40000 50000 60000Earnings (USD)

EITCWTC w/ childcare subsidyWTC, w/o childcare subsidy

Back67 / 167

WTC Maximum Credit Over TimeIncluding the Child Tax Credit

1 child

2 children3 children

0 children

FIS FC WFTC WTC

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

68 / 167

Extensive Margin MeasuresAll Women, 20-50

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Employed last weekParticipated last weekEmployed last yearParticipated last year

69 / 167

Extensive Margin MeasuresSingle Women, 20-50

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

70 / 167

Extensive Margin MeasuresSingle Mothers, 20-50

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

71 / 167

(Annual Employment)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP72 / 167

(Annual Employment)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP73 / 167

(Annual Employment)

14.9pp 14.9pp

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP74 / 167

(Annual Employment)

sitive

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP75 / 167

(Annual Employment)

sitive

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP76 / 167

(Annual Employment)

sitive

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP77 / 167

(Annual Employment)

sitive

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP78 / 167

Labor Force Participation of Single WomenBy Number of Children(Annual Employment)

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP79 / 167

Much larger increaseby those with 3+ kids40

sitive

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP80 / 167

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP81 / 167

And no increasehere either

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP82 / 167

(Annual Employment)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP 83 / 167

(Annual Employment)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP 84 / 167

(Annual Employment)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

LFP 85 / 167

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

All Educations86 / 167

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

20.8pp 16.8pp

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

Much larger increaseby those with 3+ kids

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

And no increasehere either40

-1 -.5 0 .5 1

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

All Educations 97 / 167

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

(Low Education)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Labor Force Participation of Married WomenWith and Without Children (Spousal Earnings Above First Kink)

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Year

Back 100 / 167

(Annual Employment)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

LFP101 / 167

(Annual Employment)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

LFP102 / 167

(Annual Employment)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

DiD Unemployment

LFP103 / 167

(Low Education)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

(Low Education)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

(Low Education)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

(Spousal Earnings Below First Kink)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back107 / 167

(Spousal Earnings Above First Kink)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back108 / 167

Labor Force Participation of Married WomenTriple-Diff: With and Without Children, Below and Above Kink

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back109 / 167

Bastian ReplicationSingle Women and Married Women with Spousal Earnings Below EITC Exhaustion

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back110 / 167

Refining the SpecificationSingle Women and Married Women with Spousal Earnings Below First EITC Kink

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back111 / 167

Adding the Unemployment SeriesSingle Women and Married Women with Spousal Earnings Below First EITC Kink

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back112 / 167

Splitting the Sample

Single Women Married Women(Spousal Earnings Below First Kink)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back 113 / 167

Married Women Placebo Test

Married Women Married Women(Spousal Earnings Below First Kink) (Spousal Earnings Above First Kink)

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85Year

Back 114 / 167

(Annual Participation)

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Weekly Participation115 / 167

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Annual Participation, Unemployment Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Annual Participation, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Weekly Participation

118 / 167

(Weekly Employment)

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Weekly Employment)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Weekly Employment, Unemployment Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Weekly Employment, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

122 / 167

(Annual Employment)

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Annual Employment)

OBRA93 PRWORA

sitive

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Annual Employment, Unemployment Controls)

OBRA93 PRWORA

sitive

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Annual Employment, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

sitive

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

126 / 167

(Low Education)

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Low Education)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Low Education, Unemployment Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Low Education, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

Labor Force Participation of Single WomenWith 1 and 2+ Children

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

1 child 2+ children

With and Without Children131 / 167

Labor Force Participation of Single WomenDiD: Difference Between Those With 1 and 2+ Children

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Unemployment Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

(Any Waiver Approved, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

All Waivers

135 / 167

(Any Waiver Implemented, Unemployment and Welfare Waiver Controls)

OBRA93 PRWORA

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03Year

All Waivers

136 / 167

Synthetic StatesI California: 40% Alabama, 29% Arizona, 27% Nevada, 3% Montana, 2%

Washington

I Connecticut: 26% Missouri, 14% South Dakota, 9% Texas, 9%Tennessee, 7% Alaska, 35% other states

I DC: 54% Alaska, 46% Kentucky

I Minnesota: 61% Pennsylvania, 39% Tennessee

I New Jersey: 25% Kentucky, 21% Alaska, 18% New Hampshire, 13%Arizona, 11% Montana, 12% other states

I New York: 51% Pennsylvania, 49% West Virginia

I Vermont: 61% Washington, 31% Arkansas, 8% Pennsylvania

I Wisconsin: 53% Washington, 27% Pennsylvania, 20% Missouri

137 / 167

All State EITC Introductions: Event StudyTreatment and Synthetic Control States

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

Large Reforms

138 / 167

All State EITC Introductions: Event StudyDiD: Difference Between Treatment and Synthetic Control States

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

Large Reforms

139 / 167

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

140 / 167

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

141 / 167

(Weekly Employment)

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

142 / 167

(Weekly Employment)

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

143 / 167

(Annual Employment)

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

144 / 167

(Annual Employment)

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

145 / 167

Large State EITC Reforms: Event StudyActual DiD Estimates vs Placebo DiD Estimates

Reform

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10Year

Actual Estimates Placebo Estimates

146 / 167

(Low Education)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Low Education, Normalized)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Low Education)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Low Education, Adding Linear Pre-Trends)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Low Education, Controlling for Unemployment and Demographics)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Low Education, Adding Pre-Trend Controls)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

Labor Force Participation of Single WomenWith and Without Children(Employment, All Edu)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP153 / 167

(Employment, All Educations, Normalized)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP154 / 167

(Employment, All Educations)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP155 / 167

(Employment, All Educations, Adding Linear Pre-Trends)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP156 / 167

(Employment, All Educations, Controlling for Unemployment and Demographics)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP157 / 167

(Employment, All Educations, Adding Pre-Trend Controls)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP158 / 167

(Employment, Low Education)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

LFP (All Edu)159 / 167

(Employment, Low Education, Normalized)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Employment, Low Education)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Employment, Low Education, Adding Linear Pre-Trends)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Employment, Low Education, Controlling for Unemployment and Demographics)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(Employment, Low Education, Adding Pre-Trend Controls)

WFTC WTC

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Year

(BHPS, Normalized)

WFTC WTC

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Year

Back165 / 167

(BHPS)

WFTC WTC

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Year

Back166 / 167

(BHPS, Controlling for Demographics)

WFTC WTC

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Year

Back167 / 167

Taxation and Labor Force Participation: The EITC Reconsideredsaez/course131/KlevenEITCSlides.pdf ·...

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