The Incidence of an Earned Income Tax Credit: Evaluating the Impact on Wages in the UK JOB MARKET PAPER
نویسنده
چکیده
Tax credits have been a popular way to alleviate in-work poverty. The assumption is typically that the incidence is on the claimant workers. However, economic theory suggests no particular reason to believe that this should be the case. This paper investigates the incidence of the Working FamiliesTax Credit in the UK introduced in 1999, which unlike similar tax credit policies was paid through the wage packet, increasing the connection between the employer and worker with regard to the tax credit. Using two stage parametric and non-parametric censored regression methods we nd compelling evidence to suggest that (1) the rm discriminates by cutting the wage of claimant workers relative to similarly skilled non-claimant workers when looking at men and lone mothers and (2) there is a strong spill-over e¤ect onto the wage of both groups for both men and women. JEL classi cation: J30, H22, I38, D58
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