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The EITC disincentive: The effects on hours worked from the phase-out of the Earned Income Tax Credit

Date Added to Library: 
Wednesday, September 5, 2012 - 14:18
Individual Author: 
Trampe, Paul
Reference Type: 
Published Date: 
September 2007
Published Date (Text): 
September 2007
Econ Journal Watch
Issue Number: 
Page Range: 

This paper examines the effect on hours worked of the income-based phase-out of the Earned Income Tax Credit (EITC). It discusses earlier literature on the subject. While the effects on labor force participation of EITC have been thoroughly studied, producing a consensus that the program encourages participation particularly among single women with children, the effect on hours has taken a back seat in most studies. Those who have studied the issue have generally found no effect. A number of those studies, however, were based on a population defined too broadly to indicate anything meaningful for the EITC population, while others seemed to overlook facets of their own data. I include a multiple regression using Current Population Survey Data cases in which family income corresponds to the phase-out range of EITC. Only in the phase-out range – as beneficiaries lose part of their benefits as a percentage of income above the threshold amount – would we expect a negative effect on hours worked. My results show a small negative effect on hours worked for the population in the phase-out range. (author abstract)

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