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Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

Author

Listed:
  • Schanzenbach, Diane Whitmore

    (Northwestern University)

  • Strain, Michael R.

    (American Enterprise Institute for Public Policy Research)

Abstract
The 2021 Child Tax Credit (CTC) expansion increased government benefits to families, and especially to families with the lowest incomes. Economic theory predicts that this policy intervention would have led to a reduction in labor supply among adults in those families. Our review of available research suggests that employment within broadly defined demographic groups was not reduced by the 2021 CTC changes. However, we present evidence that employment was reduced among mothers with relatively low levels of education - the demographic group that was most affected by the CTC expansion. For the 2021 CTC expansion, theory and evidence were in the strongest alignment when the research design that produced the evidence was most focused on the demographic groups most likely to be affected by the expansion.

Suggested Citation

  • Schanzenbach, Diane Whitmore & Strain, Michael R., 2024. "Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence," IZA Discussion Papers 17041, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17041
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    File URL: https://docs.iza.org/dp17041.pdf
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    References listed on IDEAS

    as
    1. Jeehoon Han & Bruce D. Meyer & James X. Sullivan, 2022. "Real-Time Poverty, Material Well-Being, and the Child Tax Credit," National Tax Journal, University of Chicago Press, vol. 75(4), pages 817-846.
    2. Harry J. Holzer & Glenn Hubbard & Michael R. Strain, 2024. "Did pandemic unemployment benefits increase unemployment? Evidence from early state‐level expirations," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 24-38, January.
    3. Jessica Pac & Lawrence M. Berger, 2024. "Quasi‐experimental evidence on the employment effects of the 2021 fully refundable monthly child tax credit," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(1), pages 192-213, January.
    4. Jacob Goldin & Katherine Michelmore, 2022. "Who Benefits from the Child Tax Credit?," National Tax Journal, University of Chicago Press, vol. 75(1), pages 123-147.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    employment; labor supply; cash transfers; maternal employment; child tax credit;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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