Review of Economics of the Household

, Volume 11, Issue 4, pp 659–680 | Cite as

Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?

  • H. Luke Shaefer
  • Xiaoqing Song
  • Trina R. Williams Shanks


The Earned Income Tax Credit (EITC) is a refundable credit for low-income workers mainly targeted at families with children. This study uses the Survey of Income and Program Participation’s topical modules on Assets and Liabilities to examine associations between the EITC expansions during the early 1990s and the unsecured debt of the households of single mothers. We use two difference-in-differences comparisons over the study period 1988–1999, first comparing single mothers to single childless women, and then comparing single mothers with two or more children to single mothers with exactly one child. In both cases we find that the EITC expansions are associated with a relative decline in the unsecured debt of affected households of single mothers. While not direct evidence of a causal relationship, this is suggestive evidence that single mothers may have used part of their EITC to limit the growth of their unsecured debt during this period.


Earned Income Tax Credit Single Mothers Unsecured Debt 

JEL classification

H23 H53 I38 



This work has been supported in part by a grant to H. Luke Shaefer from the National Poverty Center at the University of Michigan, supported by award #1 U01AE000002-02 from the US Department of Health and Human Services, office of the Assistant Secretary for Planning and Evaluation; and in part by a grant from the National Science Foundation, award No. SES 1131500. Any opinions expressed are those of the authors alone and should not be construed as representing the opinions or policy of any agency or the Federal Government. We thank Jennifer Romich, Sheldon Danziger, and two anonymous reviewers for comments on earlier versions of this manuscript.

Supplementary material

11150_2012_9144_MOESM1_ESM.xlsx (63 kb)
Supplementary material 1 (XLSX 63 kb)
11150_2012_9144_MOESM2_ESM.docx (104 kb)
Supplementary material 2 (DOCX 104 kb)


  1. Barrow, L., & McGranahan, L. (2000). The effects of the earned income credit on the seasonality of household expenditures. National Tax Journal, 53(4), 1211–1244.Google Scholar
  2. Bumpass, L. L., & Raley, R. K. (1995). Redefining single-parent families: Cohabitation and changing family reality. Demography, 32(1995), 97–109.CrossRefGoogle Scholar
  3. Burbidge, J. B., Magee, L., & Robb, A. L. (1988). Alternative transformations to handle extreme values of the dependent variable. Journal of the American Statistical Association, 83(401), 123–127.CrossRefGoogle Scholar
  4. Crouse, G. (1999). State implementation of major changes to welfare policies, 1992–1998. Available at Access date February 8, 2010.
  5. Currie, J. (2006). The take-up of social benefits. In A. Auerbach, D. Card, & J. Quigley (Eds.), Poverty, the distribution of income, and public policy (pp. 80–148). New York: Russell Sage Foundation.Google Scholar
  6. Czajka, J. L., Jacobson, J. E., & Cody, S. (2003). Survey estimates of wealth: A comparative analysis and review of the survey of income and program participation. Washington, DC: Mathematica Policy Research. Available at . Accessed April 12, 2010.
  7. Dahl, M., DeLeire, T., & Schwabish, J. (2009). Stepping stone or dead end? The effect of the EITC on earnings growth. National Tax Journal, 62(2), 329–346.Google Scholar
  8. Eissa, N. & Liebman, J. B. (1996). Labor supply response to the earned income tax credit. Quarterly Journal Of Economics, May, 605–637.Google Scholar
  9. Ellwood, D. T. (2000). The impact of the Earned income tax credit and social policy reforms on work, marriage, and living arrangements. National tax journal, 53(4, 2), 1063–1105.Google Scholar
  10. Folk, F. K. (1996). Single mothers in various living arrangements: Differences in economic and time resources. The American Journal of Economics and Sociology, 55(3), 277–292.CrossRefGoogle Scholar
  11. Garcia, J. A. (2007). Borrowing to make ends meet: The rapid growth of credit card debt in America. A report by Demos: A network for ideas & action. Available at . Access date April 12, 2010.
  12. Hotz, V. J. & Scholz, J. K. (2003). The earned income tax credit. In R. Moffitt (Ed.) Means-tested transfer programs in the U.S., (pp. 141–98). Chicago: University of Chicago Press.Google Scholar
  13. Hoynes, H. (2008). The earned income tax credit, welfare reform, and the employment of low-skilled single mothers. Paper prepared for Chicago Federal Research Bank of Chicago Conference “Strategies for improving economic mobility of workers,” November 2007.Google Scholar
  14. Mendenhall, R., Edin, K., Crowley, S., Sykes, J., Tach, L., Kriz, K. & Kling, J. (2010). The role earned income tax credit in the budgets of low-income families. National Poverty Center Working Paper #10-05,
  15. Meyer, B. D., & Rosenbaum, D. T. (2001). Welfare, the earned income tax credit, and the labor supply of single mothers. Quarterly Journal of Economics, 116(3), 1063–1114.CrossRefGoogle Scholar
  16. Meyer, B. D., & Sullivan, J. X. (2004). The effects of welfare and tax reform: The material well-being of single mothers in the 1980s and 1990s. Journal of public economics, 88(2004), 1387–1420.CrossRefGoogle Scholar
  17. National Research Council. (1995). Measuring poverty: A new approach. Washington DC: National Academy Press.Google Scholar
  18. Ratcliffe, C., Chen, H., Williams Shanks, T. R., Nam, Y., Schreiner, M., Zhan, M., et al. (2008). Assessing asset data. In S. McKernan & M. Sherraden (Eds.), Asset building and low-income families. Washington, DC: Urban Institute Press.Google Scholar
  19. Rhine, S. L. W., Su S., Osaki Y., & Lee S. Y. (2005). Householder response to the earned income tax credit: Path of sustenance or road to asset building. Working Paper, Office of Regional and Community Affairs, Federal Reserve Bank of New York, and Community Food Resource Center, NY. Available at Access date April 12, 2010.
  20. Romich, J., & Weisner, T. (2000). How families view and use the EITC: Advance payment versus lump sum delivery. National tax journal, 53(4), 1245–1264.Google Scholar
  21. Scholz, J. K. (1994). The earned income tax credit: Participation, compliance, and anti-poverty effectiveness. National Tax Journal, 47(March), 59–81.Google Scholar
  22. Smeeding, T. M., Phillips, K. R., & O’Conner, M. (2000). The EITC: Expectation, knowledge, use, and economic and social mobility. National tax journal, 53(4), 1187–1210.Google Scholar
  23. Spader, J., Ratcliffe J., & Stegman M. A. (2005). Transforming tax refunds into assets: A panel survey of VITA clients in Greenville, Henderson, and Raleigh, North Carolina. Center for Community Capitalism, University of North Carolina at Chapel Hill. Available at Access date April 12, 2010.
  24. Sullivan, J. X. (2006). Welfare reform, saving, and vehicle ownership for the poor: Do asset tests and vehicle exemptions matter? Journal of human resources, 41(1), 72–105.Google Scholar
  25. Sullivan, J. X. (2008). Borrowing during unemployment: Unsecured debt as a safety net. Journal of human resources, 43(2), 383–412.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  • H. Luke Shaefer
    • 1
  • Xiaoqing Song
    • 2
  • Trina R. Williams Shanks
    • 1
  1. 1.School of Social WorkUniversity of MichiganAve Ann ArborUSA
  2. 2.Department of EconomicsUniversity of MichiganAnn ArborUSA

Personalised recommendations