This paper explores the interaction between the federal Earned Income Tax Credit (EITC) and the cost-of-living faced by single mothers. After the 1993 EITC expansion, we identify up to an 8 percentage point increase in labor force participation for single mothers in the lowest cost areas but no discernible response in the highest cost areas. We conclude that the EITC’s welfare-enhancing properties are undermined by the interaction of the program’s fixed national rules and geographic variation in wages and the cost-of-living. In addition, our findings suggest that the EITC does little to reduce joblessness in many of the nation’s largest cities. (author abstract)
The interaction of metropolitan cost-of-living and the federal Earned Income Tax Credit: One size fits all?
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