Does the Earned Income Tax Credit Affect Well-Being?
Abstract
The Earned Income Tax Credit (EITC) is one of the largest anti-poverty policy tools in the United States. This study estimates the causal relationship between the EITC and subjective well-being (SWB), which includes measures of happiness and life satisfaction, using two quasi-experimental approaches. First, I exploit state-level variation in EITC supplements over time to assess the impact of EITC generosity on SWB. Second, I use a simulated instrumental variable to analyze the effect of net income on SWB, accounting for endogenous labor supply responses. By leveraging policy changes at both the state and federal levels, depending on the number of children in a household, I find that while the EITC significantly increases household income, itsdirect impact on SWB is nuanced. Specifically, a $1,000 increase in EITC generosity is associated with a modest increase in SWB, particularly for individuals surveyed during the months when tax refunds are disbursed. However, changes in net income do not consistently lead to significant improvements in SWB.
Does Financial Education Increase Financial Well-Being?
Abstract: Financial education mandates have proliferated over the last three decades. This paper estimates the impact of state financial education policy on individuals' financial well-being. I exploit variation in the intensity of the mandates across states and time, and I use staggered difference-in-difference methods.