December 22, 2011
Estimating the labour supply response to the earned income tax credit for single parents in the Netherlands
In 2002, the Dutch government extended the eligibility conditions of the earned income tax credit for single parents to single parents with a child of 12 to 15 years old. We use this natural experiment to study the labour supply response of single parents.
We find that the policy reform increased the participation rate of single parents with a youngest child pf 12 to 15 years old by 1.7-2.0 percentage points, and increased their average number of hours worked by 0.8 hours per week. The implicit wage elasticity of participation is 0.4-0.5, and the implicit wage elasticity of total hours worked is 0.6.
