New Evidence on the Effect of Public Policy on Employment, Intergenerational Mobility, Family Structure, and Social Attitudes Towards Working Women

My dissertation finds new evidence that public policy can be used to reduce poverty, increase economic opportunity, and encourage egalitarian social attitudes in the United States. I focus on the Earned Income Tax Credit (EITC), a wage subsidy that has become one of the most important parts of the U.S. social safety net. By 2013, the EITC redistributed $66 billion to over 28 million low-income households and lifted 9.4 million individuals out of poverty. I show that the EITC affects mothers’ labor-market outcomes, the education and earnings of children of EITC recipients, marriage and fertility decisions, and social attitudes towards working women. Chapter 1: The rise of working mothers radically changed the U.S. economy and the role of women in society. In one of the first studies of the 1975 EITC, I find that this program increased maternal employment by 7 percent, representing one million mothers. The EITC can help explain why the U.S. has long had such a high fraction of working mothers despite few childcare subsidies or parental-leave policies. This influx of working mothers likely had subsequent effects on the country: I find evidence that the EITC affected social attitudes and led to higher approval of working women. Chapter 2: Using four decades of variation in the federal and state EITC, we estimate the impact of the EITC on education and employment outcomes on children exposed to EITC expansions in childhood. Reduced-form results suggest that an additional $1,000 in EITC exposure when a child is 13 to 18 years old increases the likelihood of completing high school (1.3 percent), completing college (4.2 percent), being employed as a young adult (1.0 percent), and earnings by 2.2 percent. Instrumental variables analysis reveals that the primary channel through which the EITC improves these outcomes is increases in pre-tax family earnings. Chapter 3: There has long been a concern that public assistance programs in the U.S. discourage marriage among lower-income couples. The EITC provides a marriage bonus to some couples but a marriage penalty to others, and encourages some households to have more children but others to have less. The overall average effect of the EITC is therefore theoretically ambiguous and existing empirical evidence has been mixed. Using over 30 years of household panel data – and a novel approach that controls for current fertility and marital status – I find that state EITC expansions have positive average effects on both fertility and marriage. Marriage effects are largest for currently unmarried adults and give pause to concerns about the negative effects of the EITC on marriage. These results also imply that some estimates in the EITC literature may be biased, since endogenous switching from the control to the treatment group (defined by marital status or number of children) would violate the stable-group-composition condition required by difference in differences.PHDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttps://deepblue.lib.umich.edu/bitstream/2027.42/140804/1/jacobbas_1.pd