Essays on Child Support Enforcement and Tax Evasion.

Abstract

This dissertation explores impacts of state child support laws and earned income tax credits (EITCs) on fathers' contact with their children; their participation in regular and off-the-books work; and whether they substitute toward informal child support in response to "taxes" on formal support.

The first essay uses state laws requiring employers to withhold child support as an exogenous source of variation in child support payment methods. Holding payment amount constant, if payment method does not affect behavior, withholding should change neither the amount of support paid nor the amount of parent-child contact for parents. I examine how payment method affects father-child contact and payment of in-kind support by instrumenting for withholding status using variation in the timing of state withholding laws. For fathers who are not in arrears, withholding reduces the amount of time fathers spend with their children and the likelihood of providing in-kind support. The results are consistent with a salience model in which changing the payment method changes the visibility of the child's consumption.

The second essay examines the effects of state policies granting taxpayers an additional percentage of the federal EITC. EITCs subsidize regular employment and make it more attractive relative to off-the-books work. I use variation in state EITCs between 1997-2005 to identify labor supply responses in the Fragile Families data. Among unmarried urban fathers, an increase in a state EITC of one percent of the federal credit has large negative effects on participation in informal work but no significant effect on participation in the regular sector. Usual hours worked per week increase in the regular sector and decrease in the underground sector.

The last essay examines whether states' elimination of welfare disregard rules for child support payments caused parents to substitute between formal and informal forms of support. Using state-level policy variation in child support disregard policies, I find that a $100 decrease in the disregard corresponds to a 4.1 percent increase in the probability a child will receive in-kind child support. In addition, I find turnover of about one third of the child support sample between Survey of Program Dynamics waves.