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  5. Realized Economic Effects of the Fully Refundable Child Tax Credit
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Realized Economic Effects of the Fully Refundable Child Tax Credit

Paper Session

Sunday, Jan. 8, 2023 8:00 AM - 10:00 AM (CST)

Hilton Riverside, Quarterdeck A-B
Hosted By: American Economic Association
  • Chair: Damon Jones, University of Chicago

The Short-Term Labor Supply Response to the Expanded Child Tax Credit

Brandon Enriquez
,
Massachusetts Institute of Technology
Damon Jones
,
University of Chicago
Ernie Tedeschi
,
~

Abstract

We estimate the extensive and intensive margin labor supply response to the monthly Child Tax Credit
paid out to families in 2021 as a part of the American Rescue Plan Act (ARPA). We use monthly
microdata from the Current Population Survey (CPS) to compare households who qualify for varying
relative increases in household income, as a result of their income level and household size. We
compare families who qualify for larger and smaller amounts, in the latter part of the year, when the
payments begin, using the early half of the year and prior years as a baseline reference. We do not find
strong evidence of a change in labor supply for families receiving the credit. The results are robust to
alternative models of labor supply, where households respond mainly to changes in the annual budget
set, or in alternative models where households respond primarily to cash on hand.

The Impact of the Child Tax Credit on Material Hardship

Elizabeth Ananat
,
Columbia University
Zachary Parolin
,
Bocconi University
Sophie Collyer
,
Columbia University
Megan Curran
,
Columbia University
Christopher Wimer
,
Columbia University

Abstract

The transformation of the Child Tax Credit (CTC) into a more generous and inclusive monthly payment
in 2021 marked an historic, but temporary, shift in the American welfare state’s treatment of low-income
families. This study uses Census Household Pulse Survey microdata from April 2021 to June 2022 to
investigate the effects of the monthly CTC payments, their cessation, and the March 2022 lump-sum
payment on three measures of material hardship: food insufficiency, missed rent/mortgage payments,
and difficulty in meeting essential expenses. Preliminary results focused on the introduction of the
payments show that the CTC strongly reduced food insufficiency: the payments were associated with a
2.3 percentage point (21 percent) decline in food insufficiency among respondents with children, and a
6.6 percentage point (26 percent) decline among low-income respondents with children. Estimates of
the treatment effect on the treated suggest a 12.7 percentage point (50 percent) reduction effect for
low-income CTC recipients. The CTC had small effects on difficulty in meeting expenses and did not
reduce housing hardship. The effects of the CTC on food insufficiency were strongest among Black and
Hispanic families with incomes under $35,000. However, the lowest-income respondents were less
likely than higher-income respondents to receive the initial CTC payments, likely constraining the effects
of the CTC on material hardship below their full potential.

The 2021 Child Tax Credit: Who Received It and How Did They Spend It?

Katherine Michelmore
,
University of Michigan
Natasha Pilkauskas
,
University of Michigan

Abstract

This paper examines the 2021 temporary expansion of the Child Tax Credit that provided monthly
payments to families with children from July to December 2021. We investigate trends in who received
the monthly benefit, who did not, and how they spent the credit. Finally, using a parameterized
difference-in-differences approach, we examine the effect of the monthly credit on material hardship
among a sample of parents with very low incomes. Overall, approximately two-thirds of eligible families
with low incomes reported receiving the monthly CTC. Employed individuals, and individuals with at
least $500 of earnings were more likely to report receiving the monthly benefit, while Hispanic families
and those who did not file taxes were least likely to receive the benefit. Overall, families report spending
the credit to pay down bills, purchase school supplies, and purchase other necessities. These
purchases led to lower reports of material hardship, particularly food insecurity.
JEL Classifications
  • I3 - Welfare, Well-Being, and Poverty