Discussion of Corinth et al.’s

“The Anti-Poverty, Targeting, 

and Labor Supply Effects of 

Replacing a Child Tax Credit 

with a Child Allowance”

Stan Veuger, American 

Enterprise Institute

2022 FCSM Research & 

Policy Conference
Contribution

The paper analyzes a range of implications of replacing the Child Tax Credit with a tax 

allowance

• It estimates that it would lead to a large reduction in child poverty rates (over 20% 

after the labor supply response is taken into account) but not of deep child poverty

• It would reduce employment by 1.5M, because the CTC is basically a partially nonrefundable EITC 

• The incidence of the child allowance would not be very progressive (though the 

same is true for the CTC)

I will mostly focus on the labor supply response estimates, the most controversial part of 

the paper.
Participation 

Elasticities

• Do Hoynes and Patel refuse to explain how 

they calculate their elasticities? Remarkable.

• Is a participation elasticity that does not vary 

with income plausible? Schanzenbach and 

Strain (2020) find a decreasing elasticity, and 

so do Eissa and Liebman (1996).

• Certainly at the household level – so not just 

for secondary earners – it seems completely 

implausible we would see extensive margin 

variation effects in the middle class and 

beyond. In fact Lippold (2022) finds zero 

elasticities for AGI over $30,000.
Participation 

Elasticities

• How do we distinguish between participation 

and reporting taxable income to receive 

refundable tax credits? (Perhaps most 

important for deep poverty.)

• Why does scaling up Keane and Moffitt (1998) 

and Schanzenbach and Strain (2020) elasticities 

not run into precisely the identification issues 

they would have run into had they used actual 

EITC receipt?

• Kleven (2022) argues that the elasticities used 

here for EITC beneficiaries (>2/3 of the 

estimated number of workers leaving the labor 

force) are outliers. Lippold (2022) appears to 

agree with that assessment. 
Kleven (2022) Elasticities
Policy Evaluation

• This literature is not always very enthused about u(c,l) with du/dc>0 and du/dl>0. How 

negative should tax rates be?

• Clear difference between current law and current policy: TCJA CTC expansion is set to 

expire in two years. How would this affect the estimates?

• I don’t think the implicit marginal tax rates associated with AFDC are comparable to 

those associated with the child allowance.
Discussion of Kye Lippold’s 

“The Effects of the Child Tax 

Credit on Labor Supply”

Stan Veuger, American Enterprise Institute

2022 FCSM Research & Policy Conference
Summary

• The paper uses a difference-in- discontinuities design to identify the effect 

of the CTC on the extensive margin of 

parental labor supply

• Parents lose eligibility when a child turns 17

• Among low-income households, loss of the 

credit reduced the likelihood of employment 

by 8.4 percentage points

• Household income below $20,000

• Years covered: 2001-2016

• The paper suggests a 0.43 steady state 

elasticity of employment with respect to the 

return to work

• Extremely clear throughout
Background 

and Theory

• I’m not proud of it but I would like to propose a 

reorganization of the paper

• Section 2 and subsections 3.1 and 3.2 (p. 4-18) contain a 

detailed overview of program parameters and a lengthy 

discussion of the existing literature (both empirics and 

theory) that I would merge and shorten

• The key contribution of the theory section is to show 

how elasticities of the extensive margin of labor supply 

with respect to transitory and steady-state tax changes 

differ

• This (valuable) theoretical exercise does not feed into the 

empirical exercise directly, but fits nicely with subsection 

5.4, where the elasticity estimates are interpreted – I 

would combine subsections 3.3 and 5.4 and Appendix B 

into a new Section 5: Interpretation and Discussion
Empirics

• The paper generally limits its sample to 

households with an AGI of $0-$20,000 and 

uses households >$30,000 for a placebo test

• Precise zero elasticity estimate from the placebo 

test

• CTC serves to incentivize entry more than to 

deter exit 

• A useful extension may be to think through 

social welfare implications 

• Can you say anything about the fate of the 

children in the somewhat longer run, perhaps 

using administrative data?

• How sticky is labor force participation?
Discussion of Larrimore, 

Mortenson, and Splinter’s

“Unemployment Insurance in 

Survey and Administrative 

Data”

Stan Veuger, American Enterprise Institute

2022 FCSM Research & Policy Conference
Motivation & 

Summary

Unemployment insurance was a 

key component of the economic 

policy response to COVID-19

The CPS does not fully capture 

COVID-era UI benefit receipt as 

reflected in IRS data 

As a result, official 2020 

poverty rates were overstated 

by two percentage points

Additionally, the UI tax 

exclusion is less progressive 

than UI benefits
CPS Underreporting & Poverty

• Complete 1099-G information

• Dramatically different picture of 2020 UI receipt

+ 45.4M recipients v. 23.6M

+ $565B in benefits v. $218B

• Notable differences with previous CPS underreporting

+ Underreporting on the intensive margin

+ Highly disproportionate underreporting for low-income households

• Corrected 2020 poverty rate is 9.6% instead of 10.4%
CPS Underreporting & Poverty

Based on UI spending 

numbers, how well 

could one infer these 

adjustments in real 

time by extrapolating 

from the CPS?

Did we ever clarify 

how much UI fraud 

there was? Can it 

explain part of the 

CPS-tax gap?
2020 Tax Exclusion for UI Benefits

• Naturally (and by design?) very regressive

• Limited implications for poverty measurement

+ Paper could make clearer this is why it broaches the topic to begin 

with

• Could the tax treatment of UI benefits serve to help optimize 

replacement rates?

+ Major issue in the crisis response content

+ Progress at the state level on this front appears limited
DISCUSSION OF 

MICHAEL 

DALTON’S 

“PUTTING THE 

PAYCHECK 

PROTECTION 

PROGRAM INTO 

PERSPECTIVE:

AN ANALYSIS 

USING 

ADMINISTRATIV

E AND SURVEY 

DATA”

STAN VEUGER, 

AMERICAN ENTERPRISE 

INSTITUTE

2022 FCSM RESEARCH 

& POLICY CONFERENCE
SUMMARY

The paper analyzes the effects of the PPP program 

Links PPP loan data to the QCEW

It finds effects on employment, wages, and opening 

status of establishments after 7 months

Key estimate is $20K-34K per employee-month 

retained (or wage bill preserved is 24% of spending)

Largest impact for small and low-wage 

establishments
PARTICIPATION 

ESTIMATES

• Around 50% of eligible establishments/employment take 

up PPP

• Adjustments get this number close to Census Pulse 

estimates

• Reassuring: high take-up in retail 

• Perhaps concerning: low take-up in leisure and hospitality 

sector

• Though high take-up in food preparation occupation

• And reassuring pre-trends, though these are less 

meaningful in the pandemic context 
IDENTIFICATION

Paper addresses concerns around heterogeneous 

effects with “modern” dynamic DiD techniques

This does not of course deal with omitted-variable 

bias issues: why did some firms apply for PPP while 

others did not?

Employment estimates with controls exceed those 

without controls – how should we think of this? Is the 

real action taking places in the interaction with the 

pandemic as opposed to through observables? 

Something like granular within-metro location?
RESULTS

• Are events beyond 10 weeks necessarily the results of PPP smoothing?

• Key program justification from an economic viewpoints was supply side preservation 

(firm-specific human capital, sure, but also intangible capital and entrepreneur 

solvency)

• CES validation exercise suggests employees were typically working

• Important for incidence questions?

• Fantastic reconciliation with Autor et al. (2020), Chetty et al. (2020), and Hubbard and Strain 

(2020) that explains differences and shows current paper’s estimates are (much) more 

comprehensive

• General-equilibrium effects are key for policy evaluation but hard to get at with micro 

techniques