Did the earned income tax credit affect women’s labour supply in Sweden?

Abstract: Women’s labour supply in Sweden, even if it is high in comparison to other countries, is still lower than men’s. Did the Earned Income Tax Credit (EITC) reform in 2007 affect women’s labour supply? It is difficult to estimate the effects of the EITC, mainly because everybody in Sweden was treated simultaneously, and because the Great Recession hit at the same time. We use a difference-in-differences (DiD) method to estimate the effect of the policy where we compare Sweden before and after the introduction with countries without an EITC (Austria, Iceland, Norway and Switzerland). Theory suggests that participation in the labour market would increase when EITC is implemented, but it is not clear if hours of work would increase among those already participating. We are unable to conclude that there are any effects on women’s labour supply in response to the EITC reform.