As highlighted by the World Health Organization (WHO) report of the Commission for Social Determinants of Health (CSDH), the understanding of the dynamics of health inequalities and their determinants is important for the establishment of informed policies to reduce them (WHO, 2008). Before The government's report, Opportunity for All: Tackling Poverty and Social Exclusion (Department of Social Security, 1999), identified poor health as one of the major problems associated with low income. Review of Economics of the Household, 16(2), 377406. State Earned Income Tax Credits and the production of child health: insurance coverage, utilization, and health status. The analysis finds a 6.91 percentage point (p<0.10) increase in the likelihood of reporting excellent or very good health status following the policy change, which corresponds to a 16.15% change. Finally, these models also control for state-level unemployment rates and whether state-level EITC benefits are in place on top of the federal credit (please see the full list of additional control variables in the Appendix). In an additional robustness test, I look at the impact of the policy for all individuals below certain income thresholds. The study exploits the expansions of the EITC through OBRA 1993 in order to test for a causal relationship between income and health outcomes. 1 Introduction The existence of a signicant positive association between income and health, also known as the income gradient in health, has been well documented in the literature Smith, J. P. (2007). Apouey, B., & Clark, A. E. (2015). The estimated equation in the DDD model is the following: where ELIGit is an indicator for whether a family is eligible to receive any EITC benefits during the year of the survey. Additionally, potential measurement errors can be reduced since each individuals health is only compared to their own prior assessment, which takes into account that respondents might have their own scales in ranking their health (reference bias). While the magnitude of these effects suggest that food expenditures and health insurance are able to explain how additional income can lead to health improvements, it seems likely that income affects health in several ways. (2014). This study examines the relationship between income and health by using an expansion of the Earned Income Tax Credit (EITC), which increased benefits to households with at least two children, as a source of exogenous variations of earnings. This column presents new evidence that the connection is hump-shaped. (2009). Quarterly Journal of Economics, 124(2), 597636. In R. Moffitt ed., Means-Tested Transfer Programs in the United States. This study finds that increases in income following the expansion of the EITC leads to improvements in self-reported health status among heads of household affected by the policy change. The results are robust to several additional specifications, including a semi-parametric DD model and specifications that account for the potential endogeneity of sample. To test for this, I re-estimate the main specification while including heads of households that switched between groups due to changes in the number of children. (2011). Health insurance eligibility, utilization of medical care, and child health. Quarterly Journal of Economics, 111(2), 605637. Effects of higher EITC payments on childrens health, quality of home environment, and noncognitive skills. Only following the implantation of the American Recovery and Reinvestment Act (ARRA) in 2009, benefits for eligible families with three or more children increased significantly. Please see Hotz and Scholz (2003) for a detailed overview of the eligibility restrictions to the EITC. (2017). The results in this section provide evidence for the role of food expenditures and health insurance coverage in explaining the observed health improvements following increases in income. (2015) find that these increases are offset by reduction in public insurance, switching to potentially more comprehensive plans could be a potential mechanism underlying the link between the EITC and health. Public Finance Review. Feenberg, D., & Coutts, E. (1993). To account for other policy changes that occurred during the period of this study, all main models are re-estimated when controlling for a set of state-specific characteristics and welfare policy variables. The results suggest that the positive effects of income on health are larger for women than for men. GAO/GGD-94-99. In their work on the Oregon Health Insurance Experiment, Finkelstein et al. Based on the convincing evidence of the findings in these studies, the existence of the income gradient in health became established and widely acknowledged. Analysis based solely on the mean may miss important information in other parts of the distribution. Health Economics, 16, 12451269. As shown in more detail in Section 4 of the paper, average annual EITC benefits for households benefiting from the expansion were substantially higher after the policy change and exceeded $2000. State Earned Income Tax Credits and participation in regular and informal work. Furthermore, two studies suggest that income might cause improved mental health outcomes (Gardner and Oswald 2007; Apouey and Clark 2015). Finding no differences in health outcomes between these two groups can provide evidence that the main analysis is actually capturing health effects due to of the EITC policy change and not due to other time-varying factors that could be correlated with health status (Averett and Wang 2013). They are not shown in the paper due to space restrictions, but are available upon request. \right)}}{{P\left( {D = 1} \right)}} \ast \varphi _0 \ast Y} \right],$$, $$\varphi _0 = \frac{{T - \gamma }}{{\gamma \ast (1 - \gamma )}} \ast \frac{{D - P\left( {D = 1{\mathrm{|}}X} \right)}}{{P\left( {D = 1\left| X \right.} A potential explanation for the differences in the magnitudes between the parametric and semi-parametric DD estimates could be that observable characteristics impact the results and whether one controls for them in a parametric or in a semi-parametric way changes the DD estimates. To further account for other welfare reforms that were passed in the late 1990s in the US, I also estimate specifications that net out the effects of several time-varying differences across states in labor market and welfare reforms (Averett and Wang 2016). The impact of family income on child achievement: evidence from the Earned Income Tax Credit. 2015; Baughman 2005). http://www.hamiltonproject.org/assets/legacy/files/downloads_and_links/expand_earned_income_tax_credit_hoynes.pdf. The impact of health insurance on health. The Economic Journal, 121(554), F183F204. The results remain similar to the main specification for the other two samples. While showing that the costs of premiums for employer-sponsored insurance plans in the US doubled from the late 1980s to the late 1990s, Cutler (2003) provides evidence that these increased costs were the main reason for why many workers decided not to enroll in insurance plans that they were offered. It has been shown to be a good predictor of other health outcomes, including mortality (Idler and Benyamini 1997), future health care usage (van Doorslaer et al. Xit represents a set of baseline covariates that include controls for age and marital status of the head of household as well as the number of children in the household. Lenhart (2017) provides suggestive evidence that increases in wages reduce financial stress and improve health outcomes of low-wage workers in the UK. (2015), and Evans and Garthwaite (2014). The histograms are not shown in the paper, but are available upon request. The Earned Income Tax Credit and fertility. Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. The study uses data for the years 1990 to 2003, which provides the analysis 11 years of data. Abstract. Averett and Wang (2016) find that higher EITCs can improve mother-rated health for children of married white mothers and unmarried Black and Hispanic mothers. The relation of social to biological processes in disease. Journal of Human Resources, 40(1), 144168. Journal of Health Economics, 27, 201227. Hoynes and Patel (2015) show that a policy-induced $1000 increase in the EITC leads a 9.4 percentage point reduction in the share of families with after-tax and transfer income below 100% poverty. 2022 Sep 14;19(18):11569. doi: 10.3390/ijerph191811569. Examining health changes among low-educated samples provides intent-to-treat estimates for the effects of the policy change. Working Paper No. One reason for the relatively small finding could be that only 14.91% of treated individuals report being in the bottom two health categories prior to the policy change. The estimates from this model are larger in magnitude than the main DD estimates in Table 4 (p<0.05), which suggests that reverse causality is not influencing the main estimates. University of Strathclyde, Department of Economics, Duncan Wing, Strathclyde Business School 199 Cathedral Street, Glasgow, UK, You can also search for this author in Thus, the main specification of this paper uses the longitudinal nature of the PSID to control for individual fixed effects and to purge the estimates of individual time-invariant heterogeneity. (1996a). i captures the individual fixed effects or unobserved time-invariant heterogeneity across individuals. (2000). Deaton, A. S., & Paxson, C. H. (1998). The simulated EITC benefits obtained through the simulation program are based on up to 22 categories, including previous years income and other types of earnings. Today, the EITC has become the largest cash transfer program as well as the most important anti-poverty policy in the United States. Nevertheless, previous work has shown that income affects the likelihood with which workers are covered by employer-sponsored insurance. Winning big but feeling no better? DD is the main parameter of interest, which captures the effect of the EITC expansion on the health status. These results are not shown in the paper, but are available upon request. (2007). When examining potential channels underlying the relationship between income and health, I find that affected household increase their food expenditures by 10.5 to 20.3 percent and are 1.52 percent more likely to have health insurance coverage. Averett, S., & Wang, Y. The U.S. Earned Income Tax Credit, its effects, and possible reforms. \right) \ast P\left( {D = 0{\mathrm{|}}X} \right)}},$$, https://doi.org/10.1007/s11150-018-9429-x, http://www.hamiltonproject.org/assets/legacy/files/downloads_and_links/expand_earned_income_tax_credit_hoynes.pdf, http://www.columbia.edu/~khm2110/draft_41015.pdf, http://creativecommons.org/licenses/by/4.0/. Overall, the findings in Table 5 confirm that the observed positive effects of additional income on health status remain when accounting for potential differential health trends between households forming treatment and control groups and remove concerns that the DD results might be biased. The Earned Income Tax Credit. B. The site is secure. Khanam, R., Nghiem, H. S., & Connelly, L. B. Consistent with the descriptive statistics shown in Tables 2 and 3, estimates for three different samples are presented. Journal of Political Economy, 80(2), 223255. Despite the fact that the data does not provide information on the quality of food being purchased, I believe that the total amount of money spent on food can indicate whether nutrition plays a role in explaining the observed health improvements. American Economic Journal, 102(5), 19271956. The main treatment effect estimates could be biased if individuals who are eligible to receive EITC benefits both before and after the policy change are more likely to benefit from income increases, which would be the case if their health were more susceptible to changes in income. Due to its detailed information on earnings, the PSID is well-suited for calculating simulated EITC benefits through the tax simulator program NBER TAXSIM (version 9; for more information see Feenberg and Coutts 1993). Contrary to economics theory, Baughman and Dickert-Conlin (2009) find evidence for extremely small reductions in higher order fertility among white women during the expansions in the 1990s. Health Economics. Federal government websites often end in .gov or .mil. The previous estimates remain unbiased if similar health trends would have occurred for individuals in both the treatment and control groups in the absence of the policy change. Chapter I re-estimate equation (1) with the main control variables as the outcomes. 1996 Feb;15(1):67-85. doi: 10.1016/0167-6296(95)00032-1. . 2014). The descriptive statistics are similar for the other two samples used in this study. Our purpose in this paper is to assess whether or not wider income differences play a causal role leading to worse health. More specifically, I test for the effect of the expansion of the EITC on different types of insurance (private, public, Medicaid/SCHIP). Cambridge, MA: MIT Press. The positive health effects are robust to variations in both sample selection and methodology and become larger when the policy change is allowed to have a 1-year adjustment period after its implementation. The average estimated fitted values for the sample is 0.6207.Footnote 11. Eligible heads of households with at least three children form the treatment group, whereas the control group consists of eligible heads of households with two children. Epub 2022 Dec 19. The estimates in Panel B show that individuals in the plateau phase experienced the largest improvements in health status (p<0.10), while the effects are smaller in magnitude and imprecisely estimated in both the phase-in and phase-out part of the schedule. Journal of Public Economics, 92(3-4), 795816. One example of this is if one-child families with health conditions in the pre-treatment period decide not to have a second child and are therefore unable to benefit from the program expansion. For this analysis, I use data from the annual March Population Survey (March CPS). Among the 149 countries surveyed in the world, China ranked 84th with a score of 5.339 ( 1 ). Self-assessed health has been widely used in previous studies regarding the relationship between income and health (e.g., Case et al. Journal of Economic Perspectives, 12(2), 145166. Social Science & Medicine, 179, 160165. The impact of socioeconomic status on health over the life-course. Ettner, Susan L., 1996. Changes in the welfare caseload and the health of low-educated mothers. Journal of Economic Behavior & Organization, 126(A), 1838. Propper, C., Rigg, J., & Burgess, S. (2007). Similarly, children would also benefit from increased insurance coverage or switches from public to private by the head of the household. The effects of income on health: new evidence from the Earned Income Tax Credit. A potential mechanism that could explain the existence of a positive relationship between the EITC and health is the intake of better nutrition following increased earnings. 2010; Gunter 2013), while those in the phase-in part have been found to work more on the extensive margin (Eissa and Liebman 1996; Eissa et al. The effects found range from 8.92 percentage points (p<0.05) in the baseline specification to 10.86 percentage points (p<0.05) when allowing the policy change to adjust for one year. Given the assumption that private insurance provides better services than public coverage, this finding provides evidence that health insurance can be viewed as a potential channel underlying the link between increases in income and improved health outcomes. Table 7 presents fixed effect DD estimates for the effects of additional income following the EITC expansion on food expenditures. Federal Reserve Bank of Chicago Working Paper 20132014. There might be third factors, such as living environment and access to better health care, education, stress or genetics, which might explain why some individuals are better off financially and in better health than others are. The statistics shown in Table A1 are obtained using the sample of people eligible to receive EITC benefits throughout the sample period. Finally, Panel D provides DDD estimates from using education as the main criteria for EITC eligibility (Averett and Wang 2013). Disclaimer. When examining potential mechanisms underlying the link between income and health, this paper provides evidence that increases in food expenditures and take-up rates of insurance can explain the observed health improvements. The treatment effects observed in this study are similar in magnitude. Specifically, I test whether the expansion had different health impacts for individuals falling in different parts of the EITC schedule (phase-in, plateau, and phase-out range). However, in a longitudinal study of New Zealands Family Tax Credit, Pega et al. To further account for potential differences in health trends between households with two or more children and those with one child, I additionally estimate Difference-in-Difference-in-Differences (DDD) models, which include heads of households with children who are not eligible to receive EITC benefits as an additional comparison group. The ATT is given by the following equation: where Y(1) and Y(0) represent health outcomes before and after the treatment, D is an indicator for belonging to the treatment group, P(D=1) gives the probability of receiving treatment, and P(D=1 | X) is the propensity score that equals the probability of treatment, conditional on the observed covariates X. In an additional model that excludes the years 1992 and 1993, I find that the results remain unchanged. Public Finance Review, 39(5), 432436. Meyer, B. D. (2007). To be consistent with the previous analysis, I use the TAXSIM simulations for the CPS data when examining the role of health insurance. The analyses (coefficient estimates as well as average marginal effects) strongly support two hypotheses by showing that (i) income has a positive and concave effect on health (Absolute Income Hypothesis); (ii) income inequalities in a country affect all members in a society (strong version of the Income Inequality Hypothesis). The fundamentals of HR include recruitment and selection, training and development, performance management, compensation and benefits, employee relations, and legal compliance. This study examines the relationship between income and health by using an expansion of the Earned Income Tax Credit (EITC), which increased benefits to households with at least two children, as a source of exogenous variations of earnings. First, I use the amounts of predicted EITC dollars that are obtained from the tax simulator in order to check whether health effects as a result of the expansion were larger for individuals who received higher EITC benefits. Reductions in income and other economic shocks increase the numbers of children being subject to neglect and abuse, while improvements in income reduce those figures. 0720, Harris School of Public Policy Studies, University of Chicago. To my knowledge, this is the first study that examines the role of changes in food expenditures as a potential channel through which higher EITC benefits might affect health. I examine treatment effects for three different specifications, which differ in how restrictive the sample was selected: (1) examines all individuals that were eligible to receive EITC benefits in all years before the policy change; (2) examines all individuals that were eligible to receive EITC benefits in at least three years both before and after the policy change; (3) examines individuals who are eligible to receive EITC benefits throughout the sample period. Review of Economic Studies, 72, 119. Kaestner, R., & Lee, W. C. (2005). In order to further test for the validity of the main results of the study, estimates for several additional robustness checks are presented in Table 6. The reform significantly increased differences in benefits given to eligible families with two or more children younger than nineteen years of age in the household and those with only one child. Due to these thresholds being constant over time, irrespective of whether an individual claims EITC benefits or not, this specification can account for the potential endogeneity of the sample selection. Cutler (2003) shows that the costs for enrolling in employer-provided insurance plans are $350 for an individual and $1500 for a family during the late 1990s, which is twice as much as the cost in the late 1980s. Social Epidemiology. The HITC, which was available during two of the four pre-treatment years of this analysis, did not have different eligibility requirement between households with one or at least two children and should therefore not affect the estimates. Economic Quarterly, 96(3), 229258. Social Science and Medicine, 15E(3), 42. Michelmore, K. (2018). volume17,pages 377410 (2019)Cite this article. Accessibility Unlike the findings by Baughman and Duchovny (2016) and Hoynes et al. Similar to Baughman (2005), Hoynes et al. Downloadable! These results are not shown in the paper, but are available upon request. What's the Issue? Money and mental wellbeing: a longitudinal study of medium-sized lottery wins. The state fixed effects are important to control for existing differences across states. In comparison, federal expenditures on Temporary Assistance to Needy Families (TANF), previously the largest cash transfer program in the United States, amounted to only $15.2 billion (Office of Family Assistance, 2011). Additionally, I test whether health effects differ for individuals who experienced relatively large increases in EITC compared to those who experienced smaller increases, which can provide additional evidence for the effects of income on health. U.S. Census Bureau. It should be noted that my study assumes full take-up rates of the EITC and therefore the estimated effects will underestimate the true effects on treated individuals. Poverty and child development: a longitudinal study of the impact of the Earned Income Tax Credit. Idler, E. L., & Benyamini, Y. Given that state fixed effects can only deal with the state-level heterogeneity that is time-invariant, including them in the specifications is not sufficient to account for statewide variations in welfare reforms. https://doi.org/10.1177/1091142116654965. Dropping individuals with missing self-reported health information in some years of the analysis could bias the results if these respondents were different from the remaining sample, for example in terms of health. Figure 1 shows the average share of individuals in both groups who report either excellent or very good health for the sample of individuals that received EITC benefits throughout the pre-expansion period. Foster care and the Earned Income Tax Credit. Health Economics, 22, 13441359. eCollection 2022. The Earned Income Tax Credit, mental health, and happiness. 15(1), pages 67-85 . To my knowledge, no previous study has examined whether the effects of EITC changes on health outcomes differ across the three parts of the schedule. Another study found that . The Hamilton Project: Policies to Address Poverty in America: 112. The results in Panel B and C show that the majority of this increase in food expenditures is driven by changes in expenditures on food eaten at home, while there are only small changes in expenditures on food eaten out. Frijters, P., Haisken-DeNew, J. P., & Shields, M. (2005). official website and that any information you provide is encrypted Consequences and predictors of new health events. The results in Panel A indicate that the effect of additional earnings on health status is substantially stronger for treated individuals who received larger EITC payments (p<0.05). EITC and Marriage. (2015) find a 3.6 percentage point increase in private insurance, while Baughman (2005) estimates increases in employer-sponsored health insurance by 3.8 percentage points following the expansions of the EITC in the mid-1990s. (2013). Between the two of them, Russia and Ukraine provide just a ton of the world's food supply. 1996; 15(1):67-85. It is noticeable that the results are fairly consistent with the DD effects shown in Table 4. Child health: evidence on the roles of family income and maternal mental health from a U.K. birth cohort. This guarantees that the same distribution of covariates is imposed for the treatment and for the control group. However, one limit is that it restricts the marginal probability effects. RAND Labor and Population Program. The March CPS also provides its own simulated EITC payments using the Census Bureaus tax model, which simulates individual tax returns to produce estimates of federal, state, and payroll tax amounts by incorporating information from non-CPS sources such as the Internal Revenue Services Statistics of Income series, the American Housing Survey and the State Tax Handbook. There are 9 individuals that switched from the control to the treatment group (99 observations) and 19 individuals who switched from the control to the treatment group (209 observations). McGranahan, L., Schanzenbach, D. W. (2013). (2015) show that the federal expansion in the EITC reduced smoking among mothers. The increased income resulting from either the work incentives or the cash benefits may be used by households to buy more health inputs (housing, medical care, nutrition, etc. (2015), my results suggest that the EITC expansion led to increases in overall insurance coverage, since the observed increases in private insurance are not offset by increases in public coverage, as found in the other two studies. The Journal of Human Resources, 42(4), 739764. American Economic Journal: Economic Policy, 6(2), 258290. Estimating the effect of income on health and mortality using lottery prizes as an exogenous source of variation in income. This site needs JavaScript to work properly. Cost-benefit analyses of government policies that may reduce disposable income should take into account potential effects on morbidity. The size of EITC credits for eligible households (in 1999 $). Reinhold, S., & Jrges, H. (2012). The impact of mental health on labour market outcomes in China. Another source of endogeneity is the potential for reverse causality, which occurs if changes in health outcomes affect peoples income. Poverty has long been recognized as a contributor to death and disease, but several recent trends have generated an increased focus on the link between income and health.First, income inequality in the United States has increased dramatically in recent . Dickert-Conlin, S., & Houser, S. (2002). (2002). What has welfare reform accomplished? Health Affairs, 21, 1330. Meer, J., Miller, D. L., & Rosen, H. S. (2003). Family incomes are relatively similar for the groups. Our purpose in this paper is to assess whether or not wider income differences play a causal role leading to worse health. Finkelstein et als (2012) LATE estimate indicates a 24.3 percent increase in the likelihood of reporting excellent, very good or good health status. Self-rated health and mortality: a review of 27 community studies. Ettner, S. L. (1996). National Tax Journal, 58(4), 665684. 1 suggests that the changes in health are more pronounced several years after the EITC expansion, it should be noted that the effects could to some extent reflect that affected individuals are simply happier following the change in the EITC. Review of Economics of the Household, 16(3), 791807. The impact of policy-driven income on childhood obesity. I use linear probability methods to estimate the main specifications shown in this section. archived recording 1 Russia and Ukraine produce about of 30 percent the world's wheat and barley. One reason for this could be that overall there is relatively small variation in EITC payments to the two groups (on average $113 per year for the entire sample period), with substantial changes only occurring around the time of the EITC expansion. I additionally re-estimate the propensity scores using the two other commonly used estimation techniques for propensity scores, logit and cloglog estimation.
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