welfare reform and the EITC in the 1990s

Welfare Reform and the Earned Income Tax Credit in the 1990s Adam Looney · working paper

A large literature credits the 1993 EITC expansion with increasing labor supply among single mothers in the 1990s, using difference-in-differences designs that compare mothers with different numbers of children. This paper shows that, once employment trends are allowed to vary with pre-reform welfare exposure, the estimated effect of the EITC falls to zero in replications of four representative studies. Placebo tests and a reweighting exercise show that the canonical estimates reflect compositional imbalance between treatment and control groups — differential exposure to welfare reform rather than differences in EITC generosity.

Paper: PDF  ·  Replication code: github.com/adamlooney/looney-eitc-welfare-reform

Citation

@unpublished{looney2026eitcwelfare,
  author = {Looney, Adam},
  title  = {Welfare Reform and the Earned Income Tax Credit in the 1990s},
  year   = {2026},
  note   = {Working paper, University of Utah and the Brookings Institution},
  url    = {https://www.adamlooney.com/data/eitc-welfare-reform}
}