Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?
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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.
KeywordsEarned Income Tax Credit Single Mothers Unsecured Debt
JEL classificationH23 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.
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