Earned income tax credit recipients: income, marginal tax rates, wealth, and credit constraints
The Earned Income Tax Credit (EITC) has evolved into the largest anti-poverty program in the United States by providing tax credits for low and moderate income working families. In this paper, we describe the characteristics of EITC recipients at various ages using Current Population Survey data. In addition, we discuss the relevance of the EITC in affecting marginal income tax rates in the United States and discuss the effects of the EITC on household labor supply decisions. Lastly, using data from the Survey of Consumer Finances, we estimate wealth distributions for EITC recipients and ...
Unemployment insurance and personal bankruptcy
The Pandemic, Child Care and Women’s Labor Force Participation
The pandemic has changed how households work, spend and care for children. In this Economic Brief, we highlight economic research that examines the patterns seen in women's work experiences in particular. We look at both the pandemic and, more generally, how shocks to the economy affect women's work decisions. Throughout, we will try to connect what we observe to households' broader economic environments and will emphasize — in the case of the pandemic — the role of away-from-home child care.
Who Values Access to College?
A quantitative model of college enrollment suggests that the value of college access varies greatly across individuals. Forty percent place no value on the option to attend despite large public subsidies, while 25 percent would enroll even without the subsidies. In the model, redirecting public funds from those who attend college irrespective of subsidies to those who don’t attend even with subsidies both preserves college enrollment and improves overall outcomes. While these two groups are clearly visible only in the model, and not in the data, this analysis suggests that more-targeted ...
College or the Stock Market, or College and the Stock Market?
In this note, we document facts about the relationship between stock market participation and a predominant form of human capital investment -- formal higher education. We examine, using the Survey of Consumer Finances (SCF), the relationship between stock market participation and college enrollment and completion, with attention to the presence or absence of student loan debt.
Household Financial Distress and the Burden of 'Aggregate' Shocks
The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing ...
Understanding Living Wills
The requirement for large financial institutions to file resolution plans, or "living wills," as mandated by the Dodd-Frank Act, may mitigate the commitment problem behind TBTF. Analyzing the equilibrium of the game between banks, regulators, and debtholders, is a first step to evaluate the effect of this new policy instrument. As an alternative to regulators tying their hands so that they are not able to intervene with a bailout in the event of financial distress, living wills are meant to make the outcomes from bankruptcy better for society. This is achieved by evaluating, and guiding, ...
Young Unskilled Women and the Earned Income Tax Credit: Insurance Without Disincentives?
The Earned Income Tax Credit (EITC) is the single most important transfer program in place in the United States. An aspect of the EITC that has received little attention thus far is its role as a public insurance program. Yet, the structure of the EITC necessarily protects its primary class of recipients, unskilled single mothers, against major risks they face to both wages and changes in family structure. Our study provides the first quantitative statement about the insurance provided by the EITC. We study a dynamic model of consumption, savings, and labor supply in which households face ...
The earned income tax credit: recipients, labor force participation, and credit constraints
There has been a longstanding debate in the United States about how to assist low-income families. The Earned Income Tax Credit (EITC) is designed to augment income while encouraging work: The tax credit increases with earnings for low levels of household income, but declines and ultimately is phased out as incomes rise. The EITC appears to have increased labor force participation but its effects on hours worked is ambiguous. Given the low levels of net wealth of most EITC recipients, it is likely that many are credit constrained and unable to smooth their consumption patterns.
Who Values Access to College?
A first glance at US data suggests that college -- given its mean returns and sharply subsidized cost for all enrollees -- could be of great value to most. Using an empirically-disciplined human capital model that allows for variation in college readiness, we show otherwise. While the top decile of valuations is indeed large (40 percent of consumption), nearly half of high school completers place zero value on access to college. Subsidies to college currently flow to those already best positioned to succeed and least sensitive to them. Even modestly targeted alternatives may therefore improve ...