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The Short-Term Labor Supply Response to the Expanded Child Tax Credit

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072623-WP-The Short-Term Labor Supply Response to the Expanded Child Tax Credit-Enriquez Jones and Tedeschi

Authors:
Brandon Enriquez, Massachusetts Institute of Technology
Damon Jones, University of Chicago
Ernest V. Tedeschi, Council of Economic Advisers

Abstract:

We estimate the extensive and intensive margin labor supply response to the monthly Child Tax Credit disbursed in 2021 as a part of the American Rescue Plan Act. Using Current Population Survey microdata, we compare labor supply outcomes among households who qualify for varying relative increases in household income, as a result of their income level and household size. We do not find strong evidence of a change in labor supply for families receiving the credit. The results are robust to alternative labor supply models, where households respond mainly to cash on hand or changes in the annual budget set.