The Effects of the EITC on Maternal Labor Supply

Three decades of research consistently found that the Earned Income Tax Credit (EITC) increased maternal employment (Eissa and Liebman, 1996; Meyer and Rosenbaum, 2001; Hoynes and Patel, 2018; Bastian, 2019), although recent work (Kleven, 2019) has challenged this conclusion. Using American Time Use Survey data, this project has two goals. One goal is to examine the null labor supply results in Kleven (2019) by looking at maternal time use. If the EITC does increase maternal labor supply, the EITC will also affect how mothers allocate their time, providing an alternate approach to testing whether the EITC had an impact on mothers. Maternal time use should not be affected if the EITC has no effect on maternal employment or if the only effect is an increase in fraudulent claiming due to fraudulent reporting self-employed income. Our data covers 2003-2018, well after welfare reform, which ensures that our results are not confounded with the simultaneity of 1990s EITC expansions and welfare reform. If the EITC does increase labor supply, our second goal is to understand how the EITC affects maternal time use. If women work more, they may spend less time with children, on home production, or on leisure. Preliminary results suggest that the EITC does increase maternal work time, while reducing time with children, on home production, and on leisure. These effects are largest for mothers with very young children. Knowing whether recent EITC expansions affected maternal labor supply, and whether this led to unintended consequences such as less parental time and investment into children, is important for contemporaneous labor market policy makers