The Earned Income Tax Credit:Targeting the Poor but Crowding Out Wealth

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Item Type Monograph (Working Paper)
Abstract In this paper, we quantify the effects of the Earned Income Tax Credit (EITC) from a macroeconomic perspective. We analyze jointly the labor supply and saving responses to changes in tax credit generosity and their aggregate and distributional implications. Our results show that the EITC raises labor force participation, provides insurance to working poor households but also disincentivizes private savings for many. Whilst reducing post-tax earnings inequality, the EITC contributes to a higher skill premium and wealth inequality. Finally, EITC expansions are welfare improving for the majority of the population, both ex ante and when accounting for transitional dynamics.
Authors Froemel, Maren & Gottlieb, Charles
Language English
Keywords Fiscal Policy, Tax Credit Policy, Insurance, Transition.
Subjects economics
social sciences
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Quantitative Economic Methods
Date September 2016
Depositing User Prof. Ph.D Charles Gottlieb
Date Deposited 21 Dec 2016 15:22
Last Modified 21 Mar 2023 01:24
URI: https://www.alexandria.unisg.ch/publications/249988

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Froemel, Maren & Gottlieb, Charles: The Earned Income Tax Credit:Targeting the Poor but Crowding Out Wealth. , 2016,

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https://www.alexandria.unisg.ch/id/eprint/249988
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