Employment and Labor Supply Responses to the Child Tax Credit Expansion: Theory and Evidence

Abstract

The 2021 Child Tax Credit (CTC) expansion increased government benefits to families, and especially to families with the lowest incomes. Economic theory predicts that this policy intervention would have led to a reduction in labor supply among adults in those families. Our review of available research suggests that employment within broadly defined demographic groups was not reduced by the 2021 CTC changes. However, we see some evidence that employment was reduced among unmarried mothers with relatively low levels of education and young children—the demographic group that was most affected by the CTC expansion.