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Blog of Tyler Cowen and Alex Tabarrok, both of whom teach at George Mason University.
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Is the earned income tax overrated?

2025-10-09 14:53:31

This policy has been so popular with economists on a bipartisan basis, yet a recent piece in ReStud raises some doubts, as the wage subsidies induce many to drop out of school:

As a complement to the federal earned income tax credit (EITC), some states offer their own EITC, typically calculated as a percentage of the federal EITC. In this paper, we analyse the effect of state EITC on education using policy discontinuities at US state borders. Our estimates reveal that an increase in the state EITC leads to a statistically significant increase in the high school dropout rate. We then use a life-cycle matching model with directed search and endogenous educational choices, search intensities, hirings, hours worked, and separations to investigate the effects of EITC on the labour market in the long run and along the transitional dynamics. We show that a tax credit targeted at low-wage (and low-skilled) workers reduces the relative return to schooling, thereby generating a powerful disincentive to pursue long-term studies. In the long run, this results in an increase in the proportion of low-skilled workers in the economy, which may have important implications for employment, productivity, and income inequality. Finally, we use the model to determine the optimal design of the EITC.

That is by , , and  One simple lesson is that policy economics is often not easy.  Via the excellent Kevin Lewis.

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Claims about polygyny

2025-10-09 12:48:45

The title of this piece is “High rates of polygyny do not lock large proportions of men out of the marriage market.”  I believe further investigation is warranted before drawing such conclusions, but here is the abstract:

Social scientists often assume that when men can marry multiple wives (polygyny), many other men will be unable to marry. Versions of this assumption feature prominently in theories of civil war, the evolution of monogamy, and the incel movement. Using census data from 30 countries across Africa, Asia, and Oceania, as well as data from the historical United States, we find no clear evidence that polygyny is associated with higher proportions of unmarried men in society. Instead, high-polygyny populations often have marriage markets skewed in favor of men, and actually, men in high-polygyny populations usually marry more than men in low-polygyny ones. These findings challenge entrenched assumptions and inform debates on marriage systems, societal stability, and human rights.

That is from a recent paper by Hampton Gaddy, Rebecca Sear, and Laura Fortunato.  At the very least, you hear the contrary story so often, and without firm documentation, that it is worth shaking the debate here a little bit.

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Share repurchases do not discourage investment

2025-10-08 15:42:59

Theory tells us that, and the empirics tell us that too:

Our study examines the claim that share repurchases lead to reductions in real investments. Repurchase opponents argue that managers forego valuable investments to conduct opportunistic repurchases, while proponents argue that repurchases return excess cash to shareholders. We compare repurchasing firms’ real investments in capital expenditures, R&D, and employment to public and private non-repurchasing firms—holding constant their growth (i.e., investment) opportunity sets. Our results provide no support for the claim that repurchases lead to lower real investments. Consistent with these findings, we also show that financial analysts do not revise downward their capital expenditure forecasts following repurchases.

That is from a recent paper by Paul Brockman, Hye Seung (Grace) Lee, and Jesus M. Salas.  You see the opposing argument in the media all the time, but it is wrong, wrong, wrong.  As in “not correct.”

Via the excellent Kevin Lewis.

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