The Earned Income Tax Credit and fertility

During the last 15 years, as traditional welfare programs were being reformed and restricted, the Earned Income Tax Credit emerged to the center of the nation's anti-poverty programs. Studies have found that the credit helps improve the economic well being of low-income families with children. Most recently research has began to study the credit's unintended consequences on individual behavior, such as family formation and consumption. However, the fertility effects of the credit have yet to be considered. The first chapter gives an introduction to the Earned Income Tax Credit and summarizes the research literature to date.; Chapter 2 examines the impact of the change in the EITC structure instituted by the Omnibus Reconciliation Act of 1990, which expanded benefits for eligible taxpayers with two or more children, on fertility. If women make fertility decisions taking into account financial incentives, the expansion of the credit could have unintentionally affected the fertility decisions of families with one child. I find strong evidence indicating that following the EITC expansion of benefits, married, white women increased their fertility. The magnitudes of these effects suggest that the expansion led to a 10 to 15 percent increase in the probability of having a second child. Furthermore, it appears that the increase in fertility can be attributed to a change in the timing of second-child birth, as opposed to an increase in fertility levels. For other groups of women, I find no statistically significant evidence of an effect of the expansion on fertility.; In Chapter 3, I focus on the fertility decisions of families without children. Since the credit is by and large intended for low-income families with children, initially childless families could potentially change their fertility behavior by either moving forward or by changing the timing of the birth of their first child. Using an identification strategy similar to that in Chapter 2, I find that fertility rates did not change as a result of the EITC expansion. The result is consistent across different groups of women and is robust to different choices of control groups.