Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage

45 Pages Posted: 11 Apr 2000 Last revised: 14 May 2010

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

William Wascher

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: March 2000

Abstract

This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.

Suggested Citation

Neumark, David and Wascher, William, Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage (March 2000). NBER Working Paper No. w7599, Available at SSRN: https://ssrn.com/abstract=220831

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