Do EITC expansions pay for themselves? Effects on tax revenue and government transfers
Jacob Bastian & Maggie Jones
Journal of Public Economics, April 2021
This paper calculates the EITC's net cost by estimating effects, both direct and through recipients' behavioral changes, on tax revenue and government transfer spending. We show that the EITC increases labor supply and income, thereby increasing the taxes households pay and reducing the government transfer payments they receive. Using linked IRS-CPS data and several EITC policy changes, and focusing on married and unmarried women, we find that the EITC's net cost is only 17 percent of the ($70 billion) budgetary cost over a one-year period. Although the EITC is one of the U.S.'s largest and most important public assistance programs, the EITC is actually one of the U.S.'s least expensive anti-poverty programs.
Decomposing the Decline of Cash Assistance in the United States, 1993 to 2016
Cash assistance allocations from Temporary Assistance for Needy Families (TANF) and its predecessor program fell from $34.3 billion to $7.4 billion in real value from 1993 to 2016, a 78% decrease. Some investigations of TANF point to favorable labor market changes as the source of the decline, whereas others point to declining benefit levels and barriers to benefit receipt. This study introduces a framework to decompose the decline of TANF cash assistance into changes in need for cash assistance, the participation rate among those meeting income-based eligibility standards, and benefit levels among those receiving cash support. Using the U.S. Current Population Survey, I find that declining participation explains 52% of the decline in TANF cash assistance from 1993 onward, whereas declining need explains 21%, and declining benefit levels explain 27%. The study then applies reweighting techniques to measure the extent to which compositional changes in the population, such as rising employment rates among single mothers, can explain changes in need, participation, and benefit levels. The results suggest that compositional changes explain only 22% of the decline of TANF cash assistance, confirming that the majority of the decline is due to reduced participation and benefit levels rather than reduced demand for cash support. Adding the noncompositional share of the decline in TANF back to observed levels of cash spending in 2016 would result in nearly $20 billion in additional transfers, more than the minimum amount necessary to lift all single-mother households out of poverty.
The Impacts of Opportunity Zones on Zone Residents
Matthew Freedman, Shantanu Khanna & David Neumark
NBER Working Paper, March 2021
Created by the Tax Cuts and Jobs Act in 2017, the Opportunity Zone program was designed to encourage investment in distressed communities across the U.S. We examine the early impacts of the Opportunity Zone program on residents of targeted areas. We leverage restricted-access microdata from the American Community Survey and employ difference-in-differences and matching approaches to estimate causal reduced-form effects of the program. Our results point to modest, if any, positive effects of the Opportunity Zone program on the employment, earnings, or poverty of zone residents.
Fighting Crime in the Cradle: The Effects of Early Childhood Access to Nutritional Assistance
Andrew Barr & Alexander Smith
Journal of Human Resources, forthcoming
Using variation in the rollout of the Food Stamp Program (FSP), combined with criminal conviction data from North Carolina, we find that FSP availability in early childhood leads to large reductions in later criminal behavior. Each additional year of FSP availability in early childhood reduces the likelihood of a criminal conviction in young adulthood by 2.5 percent, with stronger effects for violent and felony convictions. These effects are substantially larger for non-whites, consistent with their higher levels of FSP participation. The discounted social benefits from the FSP's later crime reduction exceed the costs of the program over this time period.
Popping the Positive Illusion of Financial Responsibility Can Increase Personal Savings: Applications in Emerging and Western Markets
Emily Garbinsky, Nicole Mead & Daniel Gregg
Journal of Marketing, May 2021, Pages 97-112
People around the world are not saving enough money. The authors propose that one reason people undersave is because they hold the positive illusion of being financially responsible. If this conjecture is correct, then deflating this inflated self-view may increase saving, as people should become motivated to restore perceptions of financial responsibility. After establishing that people do hold the illusion of financial responsibility, the authors developed an intervention that combats this self-enhancing bias by triggering people to recognize their frequent engagement in superfluous spending. This superfluous-spender intervention increased saving by enhancing people's motivation to restore their diminished perceptions of financial responsibility. Consistent with theorizing, the intervention increased saving only when superfluous spending was under one's control and among those who were motivated to perceive themselves as financially responsible. In addition to increasing saving in Western countries, the superfluous-spender intervention increased saving of earned income and a financial windfall over time among chronically poor coffee growers in rural Uganda. Collectively, this work shows that people view their financial responsibility through rose-colored glasses, which can undermine their financial well-being. It also endows stakeholders with a simple, practical, and inexpensive intervention that offsets this bias to increase personal savings.