Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence

The EITC is intended to encourage work But EITC-induced increases in labor supply may drive wages down I simulate the economic incidence of the EITC In each scenario that I consider, a large portion of low-income single mothers' EITC payments is captured by employer) through reduced wages Workers who are EITC ineligible also see wage declines By contrast, a traditional Negative Income Tax (NIT) discourages work, and so induces large transfers from employers to their workers With my preferred parameters $1 in EITC spending increases after-tax incomes by $0 73, while $1 spent on the NIT yields $1 39