This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Journal: Economic Policy: Vol. 2 No. 1 (February 2010)

AEJ: Policy Volume. 2, Issue 1 | leftPrevious Article

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy Forthcoming Articles

Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence

Article Citation

Rothstein, Jesse. 2010. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence." American Economic Journal: Economic Policy, 2(1): 177-208.

DOI: 10.1257/pol.2.1.177

Abstract

The EITC is intended to encourage work. But EITC-induced increases in labor supply may drive wages down. I simulate the economic incidence of the EITC. In each scenario that I consider, a large portion of low-income single mothers' EITC payments is captured by employers through reduced wages. Workers who are EITC ineligible also see wage declines. By contrast, a traditional Negative Income Tax (NIT) discourages work, and so induces large transfers from employers to their workers. With my preferred parameters, $1 in EITC spending increases after-tax incomes by $0.73, while $1 spent on the NIT yields $1.39. (JEL H22, H23, H24, H31, J22)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (35.61 MB) | Online Appendix (26.89 KB)

Authors

Rothstein, Jesse (Princeton U)

JEL Classifications

H22: Taxation and Subsidies: Incidence
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H31: Fiscal Policies and Behavior of Economic Agents: Household
J22: Time Allocation and Labor Supply

Comments

View Comments on This Article (0) | Login to post a comment


American Economic Journal: Economic Policy



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy - Forthcoming Articles

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us