Year of Publication
Martin School of Public Policy and Administration
Master of Public Policy
Dr. David Agrawal
EITC provides monetary assistance to lower-income families with children, and it has expanded to become the largest cash-transfer program in the United States. Understanding how EITC affects savings is crucial, since they are closely linked to financial stability of millions of American families. Do these families put the tax credit in their savings accounts, or do they just spend it? To tackle this question, this paper examines the effects of an increase in EITC’s generosity in 2009 on investment income of eligible households with 3 children. I perform a difference-in-differences using 2005-2014 CPS data and find no statistical evidence of the reform’s impact on savings.
Dao, Vinh, "The Effect of the Earned Income Tax Credit (EITC) on Savings: Do Low-Income Households with Multiple Children Save More EITC Money?" (2020). MPA/MPP/MPFM Capstone Projects. 405.