Can Earned Income Tax Credit Affect the Labor Supply of Undocumented Immigrants?

This chapter examines the labor market effects of eliminating the Earned Income Tax Credit (EITC) for undocumented immigrants by requiring a Social Security Number to claim the credit. Using data from the Survey of Income and Program Participation and comparing likely undocumented immigrants with natives, the author find a significant decrease in the likelihood of undocumented immigrants receiving the EITC following the 1996 policy change. Leveraging Current Population Survey data, the author exploits variations in whether undocumented single mothers have children, the timing of the policy, and a placebo group of undocumented married men. The results show that the termination of the EITC led to a 6–9% point reduction in the extensive-margin labor supply of undocumented single mothers. These findings highlight the double disadvantage faced by the children of undocumented single mothers, who are predominantly US citizens in low-income households. Not only are they excluded from the benefits of the tax credit but their mothers’ labor supply and overall family income are also adversely affected.