How the EITC Affects the Labor Supply of Single Women

This thesis estimates a structural model of the EITC and the labor supply of single female heads of household using panel data. I do this by treating labor supply as a choice over a discrete set of income and labor bundles and estimating a flexible utility function defined over those goods, while modeling the distribution of wage offers. This allows me to overcome major technical limitations in the EITC and labor supply literature. I consider how effects on earnings and labor supply vary across the wage distribution and predict the effects of alternative EITC policies. I find that the EITC increased the employment of single mothers by about 7.5 percentage points, those single mothers induced into the workforce by the EITC worked an average of 1600 hours a year, and that the EITC caused single mothers already working to reduce their average labor supply by 15 hours a year. Finally, I find that increasing the rate at which better-off beneficiaries lose benefits for each additional dollar of income to fifty cents per dollar of income would result in a more efficient EITC in terms of welfare improvement per dollar spent