Impact of a Labor Income Reward Plan: An Earned Income Tax Credit (EITC) Experiment in China
Li Gan, Clifford Taylor Jr. Professor in Liberal Arts at Texas A&M University
Moderated by: Qin Gao, Professor of Social Policy and Social Work; Director, China Center for Social Policy
China currently has no in-work benefit nor social welfare programs such as the Earned Income Tax Credit (EITC) in the United States. Yet, the literature and global evidence have suggested EITC-type programs’ potentials on poverty alleviation and work incentives. This study examines the first-ever EITC field experiment in China with strong treatment intensity (20% of household monthly income) and rigorous validation procedure. The two-year experiment on 259 households shows that the participation of the program increases employment by 0.33 person (14%) and monthly working hours by 81 hours (40%) per household. We also find significant increases in household earnings and expenditures. These effects are substantially larger than the existing literature partially because of the strong treatment intensity. Our study contributes to a large literature that studies the effect of in-work benefits.
Cosponsored by the Weatherhead East Asian Institute, the Columbia China Center for Social Policy, the Columbia School of Social Work and the Center on Poverty and Social Policy at Columbia University.