"The Impacts of the Earned Income Tax Credit and Welfare Reform on Work Entry and Exit" (Job Market Paper)
This paper examines whether the employment effects associated with the Earned Income Tax Credit (EITC) and welfare reform are due to increased work entry or decreased work exit. Differentiating entry and exit effects is important for understanding how these well-regarded programs raise employment among people with different labor market attachment. Focusing empirically on the 1993 EITC expansion and the 1992–1996 welfare reforms, I apply a differences-in-differences framework and find that the EITC increased employment among low-educated unmarried mothers by six percentage points. Approximately 70 percent of this effect can be attributed to fewer labor market exits and only 30 percent to additional entries. Welfare reforms, in contrast, increased employment by 7.4 percentage points, entirely through increased entry. My findings indicate that while the tax credit is more successful at keeping workers attached to the labor market, the direct work requirements and time limits imposed by welfare reform are more effective at inducing non-workers to enter the labor force.
This paper examines whether the employment effects associated with the Earned Income Tax Credit (EITC) and welfare reform are due to increased work entry or decreased work exit. Differentiating entry and exit effects is important for understanding how these well-regarded programs raise employment among people with different labor market attachment. Focusing empirically on the 1993 EITC expansion and the 1992–1996 welfare reforms, I apply a differences-in-differences framework and find that the EITC increased employment among low-educated unmarried mothers by six percentage points. Approximately 70 percent of this effect can be attributed to fewer labor market exits and only 30 percent to additional entries. Welfare reforms, in contrast, increased employment by 7.4 percentage points, entirely through increased entry. My findings indicate that while the tax credit is more successful at keeping workers attached to the labor market, the direct work requirements and time limits imposed by welfare reform are more effective at inducing non-workers to enter the labor force.
"The Effect of the EITC and Welfare Reform on Unemployment Duration"
The framework in my job market paper implies the EITC and welfare reforms may decrease unemployment duration. In the second study I examine this topic directly. A large literature discusses how unemployment insurance affects unemployment duration, but there are few if any studies on how the EITC and welfare reforms influence lengths of unemployment spells. I employ a dynamic search model in which the hazard rate of escaping periods of unemployment is a function of search intensity and the probability of accepting a job offer at one’s pre-tax reservation wage. The EITC can be viewed as a negative tax rate that increases search intensity and the probability of accepting a job offer through a lowered reservation wage. The increased search intensity and lowered pre-tax reservation wage may help to shorten the length of unemployment. Similarly, the time limits imposed by welfare reforms should also reduce unemployment duration, mimicking the exhaustion of unemployment insurance. Using a differences-in-differences framework, I find welfare reforms increased the probability of exiting unemployment spells by 0.4 percentage points (the maximum of this exit probability being 9 percentage points) and the effect is concentrated among periods that last longer than one year. On the other hand, the EITC does not show any effect on unemployment. These findings are consistent with the results of my job market paper, which show that the EITC is not as effective as welfare reforms at inducing non-workers to enter the labor market.
"The Effect of the EITC and Welfare Reform on Re-employment Wages"
The dynamic search model implies that the EITC and welfare reforms may lower re-employment wages through its negative impact on pre-tax reservation wages. These policy changes, however, may also increase re-employment wages since they may prevent human capital depreciation through shortened unemployment duration. The overall impact on re-employment wages can therefore be either positive or negative based on relative effects from these two channels. In this project, I will apply a differences-in-differences design and employ the Survey of Income Participation Program core waves to compare the wage growth (measured as the log form of the difference in wage before and after a period of unemployment) for single mothers relative to childless women before and after policy changes.
"How do Higher Minimum Wages Affect the EITC and Labor Supply?"
A third project studies the effect of the minimum wage on the EITC and labor supply. It is motivated by recent state initiatives for increasing the minimum wage to a level of $15. My research question asks whether the two important government policies are substitutes for each other or whether they are complementary. I first simulate the EITC benefits when the federal minimum wage is increased to between 9 and 15 dollars using the NBER TAXSIM calculator, assuming constant hours of work. This simulation suggests that when the minimum wage increases from 9 to 12, changes in the EITC are positive. But when the minimum wage rises from to 13 to 15, the benefits start to decrease to a maximum level of $530. This potentially shows that the minimum wage and the EITC can be complementary when the minimum wage is low and can be substitutes when it is at a higher level. Next, I plan to use state increases in minimum wages as a source of exogenous variation and examine how these changes affect EITC benefits and labor supply.
"Food Environment and Childhood Obesity"
This working paper examines how children’s food environment—particularly the presence of food stores offering fresh produce—affects the prevalence of obesity among elementary school children. Drawing from a large dataset of geo-coded food establishments from Dun and Bradstreet (D&B) and of school level obesity prevalence from the Arkansas Center for Health Improvement (ACHI), my empirical analysis employs fixed effects models incorporating spatial lags and spatial errors to account for unobserved heterogeneity. My results indicate that an additional supermarket within a one-mile radial of the census neighborhood block center reduces the prevalence of childhood obesity by 0.58 percentage points. I found no associations between the density of supermarkets within more distant buffer areas and children’s weight status. On the other hand, the distance from the neighborhood block center to the closest dollar, convenience, and drug stores do not seem to play a role in determining childhood obesity.
The framework in my job market paper implies the EITC and welfare reforms may decrease unemployment duration. In the second study I examine this topic directly. A large literature discusses how unemployment insurance affects unemployment duration, but there are few if any studies on how the EITC and welfare reforms influence lengths of unemployment spells. I employ a dynamic search model in which the hazard rate of escaping periods of unemployment is a function of search intensity and the probability of accepting a job offer at one’s pre-tax reservation wage. The EITC can be viewed as a negative tax rate that increases search intensity and the probability of accepting a job offer through a lowered reservation wage. The increased search intensity and lowered pre-tax reservation wage may help to shorten the length of unemployment. Similarly, the time limits imposed by welfare reforms should also reduce unemployment duration, mimicking the exhaustion of unemployment insurance. Using a differences-in-differences framework, I find welfare reforms increased the probability of exiting unemployment spells by 0.4 percentage points (the maximum of this exit probability being 9 percentage points) and the effect is concentrated among periods that last longer than one year. On the other hand, the EITC does not show any effect on unemployment. These findings are consistent with the results of my job market paper, which show that the EITC is not as effective as welfare reforms at inducing non-workers to enter the labor market.
"The Effect of the EITC and Welfare Reform on Re-employment Wages"
The dynamic search model implies that the EITC and welfare reforms may lower re-employment wages through its negative impact on pre-tax reservation wages. These policy changes, however, may also increase re-employment wages since they may prevent human capital depreciation through shortened unemployment duration. The overall impact on re-employment wages can therefore be either positive or negative based on relative effects from these two channels. In this project, I will apply a differences-in-differences design and employ the Survey of Income Participation Program core waves to compare the wage growth (measured as the log form of the difference in wage before and after a period of unemployment) for single mothers relative to childless women before and after policy changes.
"How do Higher Minimum Wages Affect the EITC and Labor Supply?"
A third project studies the effect of the minimum wage on the EITC and labor supply. It is motivated by recent state initiatives for increasing the minimum wage to a level of $15. My research question asks whether the two important government policies are substitutes for each other or whether they are complementary. I first simulate the EITC benefits when the federal minimum wage is increased to between 9 and 15 dollars using the NBER TAXSIM calculator, assuming constant hours of work. This simulation suggests that when the minimum wage increases from 9 to 12, changes in the EITC are positive. But when the minimum wage rises from to 13 to 15, the benefits start to decrease to a maximum level of $530. This potentially shows that the minimum wage and the EITC can be complementary when the minimum wage is low and can be substitutes when it is at a higher level. Next, I plan to use state increases in minimum wages as a source of exogenous variation and examine how these changes affect EITC benefits and labor supply.
"Food Environment and Childhood Obesity"
This working paper examines how children’s food environment—particularly the presence of food stores offering fresh produce—affects the prevalence of obesity among elementary school children. Drawing from a large dataset of geo-coded food establishments from Dun and Bradstreet (D&B) and of school level obesity prevalence from the Arkansas Center for Health Improvement (ACHI), my empirical analysis employs fixed effects models incorporating spatial lags and spatial errors to account for unobserved heterogeneity. My results indicate that an additional supermarket within a one-mile radial of the census neighborhood block center reduces the prevalence of childhood obesity by 0.58 percentage points. I found no associations between the density of supermarkets within more distant buffer areas and children’s weight status. On the other hand, the distance from the neighborhood block center to the closest dollar, convenience, and drug stores do not seem to play a role in determining childhood obesity.