Poster #107 - The Impact of the Earned Income Tax Credit on Young Adults' Educational Outcomes

• In Event: Friday Poster Reception

Abstract

This research analyzes the relationship between the EITC and the educational trajectories of young adults, focusing on metrics such as high school GPA, college GPA, educational expectations and aspirations, and college completion rates. By examining a range of educational indicators, including academic performance, educational goals, and attainment, this study seeks to contribute to a deeper understanding of the impacts of the EITC beyond its immediate economic effects. 
This examines the causal effect of EITC exposure during high school on education outcomes of young adults between the ages of 18 and 27, including college attendance, high school and college grade point average (GPA), college aspiration, college expectation, and college completion. The EITC could have a positive effect on education by alleviating financial constraints for low-income families, therefore allowing them to allocate more resources towards educational essentials such as tutoring, school supplies, and extracurricular activities. Furthermore, the EITC can motivate parents to prioritize their children's education by providing a financial buffer that enables additional investments in educational opportunities, such as enrollment in higher-quality schools or funding college tuition. In addition, the EITC can help to decrease poverty and enhance the financial stability of households. This, in turn, may foster a favorable and conducive environment for academic success and long-term educational attainment among children who come from disadvantaged families. 
This study uses data from the Panel Study of Income Dynamics (PSID) from 1999 to 2019 and Transition to Adulthood from 2005 to 2009. Throughout the paper, the term "EITC exposure" refers to the maximum statutory amount of federal and state EITC benefit a young adult's family could receive during their high school and college years. The variation in EITC exposure is influenced by three variables: the year of birth, the state of residence during the years under consideration, and the number of children residing in the household each year.
Results show that exposure to EITC during high school, measured as the annual average statutory limit of combined federal and state tax credits that a student's family is eligible to receive, has a statistically significant positive effect on high school and college GPA. Further, the findings indicate that exposure to EITC improves the probability of completing college. Heterogeneity analyses show some differences in the impacts of EITC on these outcomes by gender and race groups. The effects of EITC on college attendance, academic expectations, and aspirations were not found to be statistically significant.

Author

• Hofner Rusiana, California State University, Long Beach
  Presenting Author