Local Labor Markets and the Federal Earned Income Tax Credit

The Earned Income Tax Credit (EITC), which offers relief from federal income-tax payments for a targeted group of taxpayers, is based on national income limits and the presence of dependent children. Benefits determinations are made with a flat national maximum level of assistance. The EITC is extended to nearly 29 million families and costs the U.S. Treasury about $64 billion annually. While the EITC uses national parameters to determine eligibility and benefits, the U.S. labor force is dispersed among a series of disparate labor markets in metropolitan areas. Each market within each geography has unique characteristics, with vastly different wage distributions and costs of living. The unique characteristics of local labor markets make the unyielding nature of a national EITC far less effective to induce labor-force changes in high-cost areas, and much more effective in low-cost areas. In this paper, we demonstrate that, while 20 percent of U.S. residents claim the EITC, the rate of claims differs vastly by metro area. EITC claim rates range from 5.5 percent in Los Alamos, New Mexico, to more than 50 percent in Rio Grande City, Texas. A primary contributor to these differentials is the difference in the credit’s real value across areas with different costs of living. The real value of the maximum EITC for a single taxpayer with one child ranges from$4,131 in Harlingen, Texas, to $1,531 in New York City. The EITC’s national income limits for eligibility and its phase-out range induce varying labor-market incentives across markets with different wage distributions. The national parameters treat similar workers differently when they live in different areas. Consider a typical single parent working as a dishwasher in San Francisco; she will be subject to the phase-out of benefits after working 1,688 hours, while that same dishwasher in Brownsville, Texas won’t face this tax until working 2,190 hours. Adjusting the value of the EITC for local labor-market and cost-of-living conditions would provide a way to target credit expansion to the most needy and induce a larger labor-market response. Changing the EITC to adjust for real purchasing-power differences could be set to maximize the policy’s employment impact across labor markets by reducing implicit marginal tax rates. Our simulations show that, to induce a 6-percentage-point increase in the labor-forceparticipation rate of eligible taxpayers, the maximum EITC for single parents in New York City would need to be$9,905, while a credit of $5,897 would induce the same response in Memphis, Tennessee

Do Landlords Discriminate in the Rental Housing Market? Evidence from an Internet Field Experiment in U.S. Cities

This paper tests for racial discrimination in the rental housing market using matched pair audits conducted via e-mail for rental units advertised on-line. We reveal home-seekers' race to landlords by sending e-mails from names with a high likelihood of association with either whites or African Americans. Generally, discrimination occurs against African American names; however, when the content of the e-mail messages insinuates home-seekers with high social class, discrimination is non-existent. Racial discrimination is more severe in neighborhoods that are near "tipping points" in racial composition, and for units that are part of a larger building.

The Geographic Distribution of the Mortgage Interest Deduction

The mortgage interest deduction is one of the largest tax expenditures in the U.S. tax code but the rate at which it is claimed and the average amount deducted vary widely across and within states. With changes to tax expenditures under consideration, data showing the current distribution of the mortgage interest deduction are key to understanding how federal tax decisions would affect the states

Essays on Social Interaction and Urban Outcomes

This dissertation consists of two essays. The connecting theme for this body of work is social interaction. I define social interaction, for this dissertation, as non-market based face-to-face interaction between individuals where each is interested in a response. The first contribution investigates the relationship between social interaction and neighborhood population density. I use the exogenous variation in a set of geological instruments to predict the neighborhood population density. The results suggest that an increase in neighborhood population density increases some types of social interaction. The second contribution brings social interaction into a standard urban consumer theory model, the Alonso-Muth model

Subtle Discrimination in the Rental Housing Market: Evidence from E-Mail Correspondence of Landlords

We find that landlords practice subtle discrimination in the rental housing market through the use of language associated with describing and viewing a unit, inviting further correspondence, making a formal greeting, and using polite language when replying to e-mail inquiries from a white name more often than to an African American name, they also send longer e-mails and respond quicker to white names

The $10.10 Minimum Wage Proposal: An Evaluation across States

This paper offers state-level estimates of job loss from increasing the federal minimum wage to $10.10 per hour in 2016. Given the vast differences in nominal wages across geography, a federal increase in minimum wage that is not indexed to local wage levels will have a differential impacts across states. The proposed minimum wage would be binding for between 17 and 18 % of workers nationally. We estimate coverage rates ranging from just 4 % in Washington D.C. to as high as 51 % in Puerto Rico, with 13 states having at least 20 % of the employed population covered by the proposal. Using labor demand elasticities from previous empirical work, these coverage rates imply national employment losses between 550,000 and 1.5 million workers. The range of state estimates shows that states are differentially impacted, with high-end loss estimates ranging between 2.8 % of covered employees in Arkansas to over 41 % in Puerto Rico. Sensitivity analysis highlights that using even a simple methodology with relatively few assumptions for estimating employment loss from minimum wage changes is subject to a high degree of uncertainty

Discrimination in Mortgage Lending: Evidence from a Correspondence Experiment

We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Our results show net discrimination by 1.8% of MLOs through non-response. We also find that MLOs offer more details about loans and are more likely to send follow up correspondence to whites. The effect of being African American on MLO response is equivalent to the effect of having a credit score that is 71 points lower