The effects of State Earned Income Tax Credits on birth weight: Main effects and state heterogeneity with the synthetic control method

The Earned Income Tax Credit (EITC) is an anti-poverty policy, enacted by the U.S. Federal and State governments, to alleviate the tax burden on low-income workers. Prior research on State-level EITCs has indicated that the policy may improve birth weight, a proxy for infant and child health, by reducing maternal poverty. Maternal poverty during pregnancy is strongly associated with low birth weight, a precursor for infant mortality and physical and cognitive development issues in children.

The current literature on the association between State EITCs and birth weight is constrained in two ways. First, researchers have not yet studied the average birth weight effects over the full time period in which State EITCs have existed. Second, previous analyses have presented average effects of these policies nationwide. We do not know if the effects of State EITCs on birth weight outcomes vary by U.S. State.

We investigate the average effects of State EITCs across the full timescale in which the policies have existed (1983-2015). To examine heterogeneous effects of the policy by U.S. State, we also implement a novel analytical approach, the synthetic control method (SCM), in which we construct counterfactual states without EITC policies and compare their birth weight outcomes to observed data from EITC states. Both analyses are focused on a specific target demographic: single mothers with a high school degree or fewer years of education.

On average, we find that State EITCs are associated with a 5g increase in birth weight amongst infants of our target population. In this same population, the odds of having a low birth weight child (<2500g) are reduced by 0.001 in EITC States compared to similar mothers in states with no EITC policy during that year. Both findings are statistically significant. While the magnitude of the association is small in terms of clinical relevance, the direction of association supports the assertion from previous research that State EITCs positively affect infant birth weight outcomes in this particular demographic. Using the synthetic control method, we find that more than 80% of states that adopt EITCs (N=27) experienced an average increase in mean annual birth weight in the state as compared to their synthetic controls. The SCM results were, however, not statistically significant. Our small sample size of control states (N=24) limited our statistical power to detect statistically significant outcomes.

This study introduces a new statistical approach to the evaluation of the infant health impacts of EITCs, enabling an analysis of specific State EITC policies. The results of this study provide further evidence that EITCs improve the health of low-income U.S. taxpayers and their children. While the magnitude of findings was small, our results should be considered in conjunction with the broader demonstrated benefits of the EITC on other outcomes related to mother and child economic circumstances, health and well being.