Presenter: Noelia Duchovny (Congressional Budget Office. )
Discussant: Susan AverettLafayette College
Motivation: The federal Earned Income Tax Credit (EITC) provides wage subsidies to working families earning below $48,000 per year in the form of refundable tax credits. The EITC has been the nation’s largest federal transfer program for the poor for almost two decades and is credited with lifting 3.3 million children out of poverty in 2009. As the credit has been expanded over the last 20 years, a substantial literature has documented the income and labor supply effects of the program. This literature together with the identified relationship between income and health suggests that the expansion of the EITC could have had an effect on health outcomes of children. However, with several exceptions , little research exists on how EITC participants use their credits and how the program affects measures of well-being beyond income.
Objectives: The goal of the paper is to evaluate the impact of the EITC on 4 discrete indicators of child health outcomes: poor overall health, mental health problems, activity limitations, and body weight (overweight, obese and underweight). In general, the income effect of the credit should lead to better health along each of these dimensions by enabling families to afford inputs to better health, including medical care and healthier food. We also analyze the effect of the EITC on insurance coverage and regular doctor visits to get a sense of how income is related to health.
Methodology: The primary data come from the Child and Young Adult supplement to the 1979 National Longitudinal Survey of Youth (NLSY79); this supplement contains panel data on all children born to NLSY79 participants. Our sample consists of children ages 2 to 14 between 1990 and 2006. The effect of the EITC is identified in a natural experiment framework, where the basic difference-in-difference comes from the fact that the federal EITC provided a higher benefit ($60 more) to families with 2 or more children starting in 1992, and the differential benefit became economically meaningful ($490 more) starting in 1994. We exploit this differential benefit implementation by comparing changes in outcomes between 1990-1993 and 1994-2006 for children in one-child families and children in larger families. To further isolate the causal impact of the EITC, we compare these trends for families above and below 200% of the federal poverty line (FPL); families above 200% FPL are eligible for at most small EITC credits and serve as an additional control group in the analysis.
Results: The preliminary results suggest that the EITC may be responsible for significant reductions in the fraction of children who are overweight (but not obese) and in the fraction of children in poor health. The reduction in overweight is concentrated among older children. The mechanism for these effects, however, is unclear. While the EITC appears to increase health insurance coverage rates, there are no significant effects on annual doctor or dental visits. The next step in our analysis is to test the robustness of these results by using an alternative source of variation in the EITC – state-level EITC supplements.
The 3rd Biennial Conference of the American Society of Health Economists took place at Cornell University.
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