The Effects of the Earned Income Tax Credit on Children’s Health, Quality of Home Environment, and Non-Cognitive Skills

The Earned Income Tax Credit (EITC) is the largest anti-poverty program in the U.S. In 1993, the EITC benefit levels were changed significantly based on the number of children in the household such that families with two or more children experienced a substantial increase in their incomes. Using data from the National Longitudinal Survey of Youth 1979 and the NLSY79 Child and Young Adult cohorts, we employ a difference-in-differences plus mother fixed-effects framework to examine the effect of this change on childrens health, non-cognitive skills and the quality of their home environment. We find that, due to the EITC expansion, children of white and Hispanic unmarried low-educated mothers of two or more children had higher quality home environment than children of mothers with only child, while children of white and Hispanic married low-educated mothers with two or more children not only experienced a higher quality of home environment but also were statistically significantly less likely to have an accident and more likely to have a higher health rating from their mothers than those of mothers with only one child. For children of black and Hispanic mothers, however, we do not see ∗Corresponding author. Department of Economics, Lafayette College, Easton, PA 18042, Email: [email protected]. Phone: 610-330-5307. Fax: 610-330-5715. †Department of Economics, Lafayette College, Easton, PA 18042, Email: [email protected]. Phone: 610-330-5297. Fax: 610-330-5715. We have benefited greatly from helpful comments from Nicholas Stacy, Dhaval Dave, David Simon, and participants at the 2013 Eastern Economic Association Annual meeting, the 2013 Southern Economic Association Annual meeting, and the 2014 American Economic Association Annual meeting. All remaining errors are our own. robust and statistically significant impacts of the policy change on the outcomes we study. Our results provide new evidence of the effects of EITC on childrens health and the quality of their home environment and therefore have important policy implications.