Labor supply response to the earned income tax credit. The Quarterly

This paper examines the impact of the Tax Reform Act of 1986 (TRA86), which included an expansion of the earned income tax credit, on the labor force participation and hours of work of single women with children. We identify the impact of TRA86 by comparing the change in labor supply of single women with children to the change for single women without children. We find that between 1984-1986 and 1988-1990, single women with children increased their relative labor force participation by up to 2.8 percentage points. We observe no change in the relative hours worked by single women with children who were already in the labor force. Historically, the United States has chosen to provide a safety net for families with children. Since 1935, Aid to Families with Dependent Children (AFDC) has supplied cash welfare payments to needy single-parent families. Families on AFDC may also re-ceive food stamps, medicaid, and housing assistance. Because the maximum level of benefits is received by families with no incom