Effects of Long-Term Exposure to the Earned Income Tax Credit on Work Disability in Later Life

This study investigates the impact of the Earned Income Tax Credit (EITC) on work disability and Social Security Disability Insurance (DI) claims among Americans. Utilizing the Panel Study of Income Dynamics, we examine the effects of EITC exposure from birth to mid-adulthood on work disability risk before retirement. Our analysis reveals that EITC exposure during adulthood significantly reduces the likelihood of work disability, potentially influencing DI trends. Specifically, a $10,000 increase in cumulative EITC exposure is associated with about a 1.25 percentage-point lower probability of any work limitation at ages 50-61 (a 0.94 percentage-point reduction in the likelihood of chronic/severe limitations) and a 0.84 percentage-point reduction in DI receipt, highlighting the EITC's potential role in reducing DI dependency and its broader implications for public policy and social welfare.