Unlocking Opportunity: The Long-Term Effects of EITC-Led Migration on Families and Intergenerational Mobility

• In Event: Tax Policy and Intergenerational Family Wellbeing

Abstract

Background and Research Question: Abundant research shows that higher family income improves children's short- and long-run outcomes, but evidence from some transfer-based income experiments raises questions about whether these gains hold for both earnings and transfer income. A key unresolved question is whether the positive effects of public transfers operate primarily through changes in parental labor supply and earnings, or whether transfer income itself plays an independent causal role in shaping children's development and long-run trajectories.

Methods: This paper revisits that question using the Earned Income Tax Credit (EITC) — a large transfer that raises after-tax income for tens of millions of low-income families — and more than 30 years of linked administrative data covering over 15 million individuals. The scale and duration of the data allow for unusually precise estimation of long-run effects and enable decomposition of effects across multiple channels, including childhood neighborhood quality, parental earnings, and EITC transfer income.

Findings/Results: We find that higher childhood EITC exposure improves a wide range of adult outcomes: in their 20s and 30s, exposed children have higher earnings, greater employment, lower poverty, improved neighborhood quality, and reduced mortality. We then decompose these long-run effects into several channels and show that a key pathway is improved neighborhood quality, as the EITC increases moves to higher-opportunity Census tracts. Effects are somewhat larger for men and are largest for children of unmarried and younger parents, but remain sizable and positive even for children of always-married parents, a group whose labor supply is unaffected by the EITC — demonstrating that transfer income itself, not just changes in parental employment, drives meaningful improvements in children's outcomes.

Conclusions/Implications: These findings demonstrate that EITC transfer income, not just parental employment and earnings, plays a powerful causal role in shaping children's long-run well-being, operating in part through improved neighborhood quality and residential mobility.

Author

• Jacob Bastian, Rutgers University - New Brunswick
  Presenting Author