The Intergenerational Transmission of Poverty and Public Assistance

Abstract

We examine the intergenerational effects of the Earned Income Tax Credit (EITC) on poverty and public assistance use. Using Panel Study of Income Dynamics (PSID) data, we find that increased exposure to the EITC in childhood reduces the likelihood of being in poverty (<100 percent of poverty) or near poverty (<200 percent of poverty) by about five percentage points. We also find evidence of reduced public assistance use for some populations. These findings build on a growing literature that considers the intergenerational impacts of public policy and suggests that the economic benefits of policies in one generation may have long-term effects on the next generation.