Macro Roundup

SF Fed from November 2018, showing they estimated the LFPR incorrectly

SF Fed, we are at full employment (once you adjust for demographics)".... We find that the LFP rate is at its trend of 62.8% in 2018, suggesting that the labor market is at full employment. Our estimate is roughly consistent with the Congressional Budget Office (CBO) estimates of the trend for 2018. Furthermore, we project that the trend will decline approximately 2.5 percentage points over the next decade...."

Andreas Hornstein, Marianna Kudlyak, and Annemarie Schweinert, "The Labor Force Participation Rate Trend and Its Projections," Federal Reserve Bank of San Francisco, November 19, 2018, https://www.frbsf.org/economic-research/publications/economic-letter/2018/november/us-labor-force-participation-rate-trend-projection/

He's referring to "Active Labour Market Policies" (in 2015 the US spent.1% of GDP versus 1.01% in say France)

Earnie claims America is spending only 1/5 the OECD average in some collection of work related welfare programs. I find that hard to believe. What is he referring to? I suspect that it's a subset of some larger amount of welfare spending where we have seen the US spend as much or more after tax as the highest spending euro countries.
"....Four years ago, the conventional wisdom among economists was that few of the working-age adults who left the labor force in the wake of the Great Recession would return. Coupled with retiring baby boomers, the implication was that the overall labor force participation rate — the share of adults with or actively looking for a job — was doomed to keep falling. But these forecasts were wrong. Instead of falling, the overall participation rate has stayed roughly flat, which is a surprisingly positive outcome against the backdrop of the aging population. And the prime-age (25-54) participation rate has risen 1.5 percentage points since 2014. It turns out that the tightening labor market of the last several years worked wonders.In particular, as jobs became more plentiful and wages gradually firmed, prime-age Americans who were out of the labor force due to disability or ill health or who wanted a job but had gotten discouraged and gave up looking started coming back after 2014. Those two categories of workers were enough to fully offset the downward effect on participation from an aging population. And while both men and women have seen labor-force gains since 2014, women have returned at about twice the magnitude of men. The lesson of the last four years, then, is that the declines in participation we saw in the wake of the Great Recession were less permanent than many economists thought. Without another recession, there’s even good reason to think prime-age participation has some further room to grow..... This reaction isn’t inevitable; in fact, among advanced countries, U.S. labor force participation seems uniquely sensitive to recessions. Europe and Japan were hit hard by the Great Recessions, too — and Europe even endured another recession in 2012. Yet, both have managed striking gains in prime-age participation. As a result, U.S. prime-age participation is falling further behind our peers, particularly among women, despite the fact that just 15 years ago the U.S. enjoyed an advantage in female employment...."

Ernie Tedeschi, "The labor force brings some joy to the 'dismal science',"The Hill, April 2, 2019, https://thehill.com/opinion/finance/436940-the-labor-force-brings-some-joy-to-the-dismal-science

CBO looks at how their LFPR estimates have changed (from March 2018)

Sadly it doesn't have a chart/table of their estimates over time

"....This paper details CBO’s methodology for estimating and projecting labor force participation rates. CBO constructs a birth-year cohort model of the labor force participation rate that estimates labor force participation rates by age-sex-education-race subgroups. Using the estimated model to project rates over the next decade, CBO expects the overall rate to decline by 2.7 percentage points, reaching 60.1 percent by 2028. Most (2.5 percentage points, or about 80 percent) of the 3.2 percentage-point decline since the 2007-2009 recession in the labor force participation rate for the population at least 16 years old is the result of aging. That decline continued a trend that began in the late 1990s and early 2000s as the early baby-boom cohorts began to turn 50 years old, the age at which individuals tend to start reducing their participation in the labor force. CBO projects that the continued aging of the population will further reduce the overall participation rate over the next 11 years by an additional 2.8 percentage points, as most baby boomers age into retirement. Although aging is the primary driver of the falling labor force participation rate, it is not the only driver, as other structural factors are driving down some group-specific participation rates.First, the members of younger birth cohorts, who are replacing baby boomers in the labor force, have participated in the labor force at lower rates, and CBO projects that this trend will continue to weigh down the participation rate over the next decade. Second, the share of people receiving disability insurance benefits is generally projected to continue rising, and people who receive such benefits are less likely to participate in the labor force. Third, the marriage rate has declined and is projected to continue decreasing, especially among men, and unmarried men tend to participate in the labor force at lower rates than married men. Finally, elements of fiscal policy, including various provisions of the ACA, have increased effective marginal tax rates and reduced the incentive for individuals to supply labor in recent years. The effects of many of these structural factors have been concentrated among the less educated, contributing greatly to the decline in the participation rates of these groups. Cyclical weakness was also an important factor weighing down the labor force participation rate over much of the previous decade, even as that rate has had much cyclical improvement in recent years. CBO’s estimates show that the drag on the overall participation rate from discouraged job seekers leaving the labor force was as much as 1.2 percentage points in 2014. Since then, many discouraged workers have reentered the labor force, and that cyclical weakness has diminished considerably. CBO estimates that the labor force participation rate remained only 0.4 percentage points below its potential rate in 2017, and that gap will close entirely in the coming years.Increases in population wide educational attainment have helped boost the participation rate since 2007, on the other hand, as more of the population now holds a bachelor’s degree. CBO estimates that increases in educational attainment have increased the observed labor force participation rate by nearly a full percentage point over the past decade, all else being equal, highlighting the importance of modeling educational attainment in projections of the labor force participation rate. CBO projects these trends to continue over the next decade, boosting the participation rate by almost another full percentage point. Although most of the decline in the overall labor force participation rate comes from the aging of the baby-boom generation, the decline in the prime-age labor force participation rate over the past decade is entirely unrelated to aging. Instead, other structural factors, including the declining propensity of successive cohorts to participate in the labor market, the increase in disability insurance incidence, the declining male marriage rate, and fiscal policy, have contributed most to the decline in that rate. The contribution of most of those factors to the declining prime-age labor force participation rate has been concentrated among the less educated. CBO expects the contribution of some of those factors to dissipate over the next decade—namely the declining male marriage rate and fiscal policy—whereas others will continue to weigh down the prime-age rate over the next decade. Furthermore, CBO finds that the effects of the 2007-2009 recession reduced the prime-age labor force participation rate considerably and that lingering cyclical weakness from the aftermath of that recession still lowers that rate some. The agency estimates that cyclical weakness reduced the prime-age rate by as much as 1.3 percentage points in 2014 and 2015. Although the improving economy and labor market have pulled some discouraged prime-age workers back into the labor market, CBO estimates that the prime-age labor force participation rate was still 0.4 percentage points below its potential in 2017.As was the case for the overall participation rate, part of the decline in recent history of the prime-age rate has been offset by the evolving educational attainment distribution. Because individuals with higher levels of educational attainment participate at higher rates, the shift toward more education in the population results in higher rates of participation. The changing educational attainment distribution contributed to an increase in the prime-age potential labor force participation rate of more than a percentage point since the end of 2007. That increase, however, is not enough to offset the decline resulting from other variables. Over the next decade, as the downward pressure from other structural factors on the prime-age labor force participation rate is expected to dissipate, CBO projects that increases in educational attainment will fully offset downward pressure on that rate from those other factors. In addition to the upward pressure from continued increases in educational attainment, CBO expects further cyclical improvement to draw more individuals who had been discouraged from seeking work back into the labor market. As a result, CBO expects those factors to drive an increase in the observed prime-age labor force participation rate over the next decade, from 81.7 percent in 2017 to 82.1 percent in 2028....."

Joshua Montes, " CBO’s Projection of Labor Force Participation Rates," Congressional Budget Office, March 2018, https://www.cbo.gov/system/files/115th-congress-2017-2018/workingpaper/53616-wp-laborforceparticipation.pdf

Quick lay of the land on EITC research V. Joseph Hotz and John Karl Scholz, "Examining the Effect of the Earned Income Tax Credit on the Labor Market Participation of Families on Welfare," National Bureau of Economic Research, January 2006, https://www.nber.org/papers/w11968
"...This paper examines the employment effects of the earned income tax credit (EITC). We use a unique dataset, created by matching administrative data from public assistance records, unemployment insurance records, and federal tax returns for a sample of California residents. We conduct a set of four tests to assess our ability to isolate the causal effects of the EITC on employment. The first test is based on the intuition that if the EITC alters employment, all else being equal, employment rates for two-or-more child families should grow relative to the employment rates of one-child families, as credit amounts available to these groups of families diverged over the 1990s. The second test examines whether or not people eligible for the EITC actually file tax returns and claim it. The third test is based on the intuition that, if the EITC, and not other factors such as the strong economy in the 1990s, is causing employment differences between families with two or more children relative to those with one child, we should expect to see no employment differences (after conditioning on other characteristics) between families with two children and families with three or more children, since the EITC did not change differentially for the latter two groups. The fourth test conditions the sample on those who do not file tax returns and again examines employment changes in the 1990s for families with two or more children relative to families with one child. Using fixed-effects empirical employment models estimated on a sample of single-parent families, our coefficient estimates are consistent with the EITC having a substantial, positive effect on the employment of families who have used or will use welfare. finds that IETC reduces work incentives for wives in two parent family..."
Nada Eissa and Hilary Hoynes, "The Earned Income Tax Credit and the Labor Supply of Married Couples," National Bureau of Economic Research, December 1998, https://www.nber.org/papers/w6856

"...Over 18 million taxpayers are projected to receive the Earned Income Tax Credit (EITC) in tax year 1997, at a total cost to the federal government of about 25 billion dollars. The EITC is refundable, so that any amount of the credit exceeding the family's tax liability is returned in the form of a cash refund. Advocates of the credit argue that this redistribution occurs with much less distortion to labor supply than that caused by other elements of the welfare system. This popular view that the credit is unlikely to hold among married couples. Theory suggests that primary earners (typically men) would increase labor force participation, but secondary earners would reduce their labor supply in response to an EITC. We study the labor supply response of married couples to several EITC expansions between 1984 and 1996. While our primary interest is the response to changes in the budget set induced by the EITC, our estimation strategy takes account of budget set changes caused by federal tax policy, and by cross-sectional variation in wages, income, and family size. We use both quasi-experimental and reduced form labor supply models to estimate the impact of EITC induced tax changes. The results suggest that EITC expansions between 1984 and 1996 increased married men's labor force participation only slightly but reduced married women's labor force participation by over a full percentage point. Overall, the evidence suggests that family labor supply and pre-tax family earnings fell among married couples. Our results imply that the EITC is effectively subsidizing married mothers to stay at home, and therefore have implications for the design of the program..."
Mead's case that the effects of the EITC are overstated, not original research

Lawrence Mead, "Overselling the Earned Income Tax Credit," National Affairs, Fall 2014, https://www.nationalaffairs.com/publications/detail/overselling-the-earned-income-tax-credit

"...To economists the important thing is the correlation they find between the EITC and work. Whether the credit operates through promoting work or retention in work, it is raising employment in some way. That is true, as far as it goes. But if such studies are to inform social policy, how the credit operates matters and cannot be ignored. If the EITC causes many poor adults to go to work on their own, as the recent studies assert, then other steps to promote work are superfluous and the idea that the poor just need better incentives and opportunities to work is confirmed. If, on the other hand, the credit only bolsters income after employment, then going to work must still be encouraged and enforced by administrative means. This difference has even broader implications for how we think about poverty. If one assumes that the response to work incentives reflects straightforward income-maximizing behavior, one can downplay the differences between the poor and the middle class. But if, as the observational accounts suggest, the poor are far less responsive to incentives or far less focused on work, then, again, work must be enforced...."
Saez finds that taxpayers who are self employed maximize their income under the EITC

Emmanuel Saez, “Do Taxpayers Bunch at Kink Points?” American Economic Journal: Economic Policy, August 2010, http://eml.berkeley.edu/~saez/saezAEJ10bunching.pdf.

"....This paper uses tax return data to analyze bunching at the kink points of the US income tax schedule. We estimate the compensated elasticity of reported income with respect to (one minus) the marginal tax rate using bunching evidence. We find clear evidence of bunching around the first kink point of the Earned Income Tax Credit but concentrated solely among the self-employed. A simple tax evasion model can account for those results. We find evidence of bunching at the threshold of the first income tax bracket where tax liability starts but no evidence of bunching at any other kink point....Our analysis has found substantial evidence of bunching around the first kink point of the EITC, but concentrated among those reporting self-employment income. For the federal income tax, we have found evidence of bunching only at the first kink point where tax liability starts with no evidence of bunching for higher kink points. We have also developed an econometric method which uses bunching evidence to estimate the intensive elasticity of reported income with respect to (one minus) the marginal tax rate in the standard microeconomic model. Several of our empirical findings suggest that the standard intensive labor supply model cannot fully account for the facts. In the case of the EITC, we have shown that all our empirical findings can be much better explained by a fully rational fixed cost model of misreporting informal self-employment income. In contrast to the standard model, this alternative model can successfully explain why we observe bunching solely for the self-employed and solely around the first EITC kink point (and not around the other EITC kink points) and only when the EITC subsidy rate is larger than the payroll social security tax..."
CRS's Economic Analysis of Program, updated in August. (this also contains an excellent literature review)

Margot Crandall-Hollick and Joseph Hughes, "The Earned Income Tax Credit (EITC): An Economic Analysis," Congressional Research Service, August 13, 2018, https://crsreports.congress.gov/product/pdf/R/R44057

"....Studies indicate that the EITC has a positive effect on the labor force participation of single mothers....More recent research has provided a more complex picture of taxpayer behavior with respect to the EITC, behavior that might not be apparent in the previous analyses of aggregate data. Specifically, it is possible that in certain circumstances a worker may adjust their income level (including by adjusting hours worked) to maximize their credit. To understand this finding, it is important to remember that there are two inflection or “kink” points in the EITC schedule: at the earned income amount and at the phase-out threshold, as illustrated in Figure 1. The earned income amount is the lowest earnings level at which the credit reaches its maximum amount. The phase-out threshold is the highest earnings level at which the credit remains at its maximum amount. Recent research has examined whether taxpayers “bunch” around these inflection point. In other words, do taxpayers tend to earn the exact amount of money needed to get the largest credit? One study found “clear evidence of bunching around the first kink point of the EITC—the point at which the credit reaches its maximum level.” In addition, bunching tended to increase over time, suggesting taxpayers were learning about the structure of the EITC. This effect, however, was concentrated among the self-employed, who can adjust their earnings more easily than wage earners (by reducing hours worked or their reported earnings). No bunching effect was found among EITC recipients with only wage income and the authors did not report evidence of bunching around the second kink point of the EITC. However, these results did indicate that some self-employed individuals were aware of the EITC formula, and how it varied by earnings. Using high rates of “self-employed bunching” as a proxy for “high knowledge” about the structure of the EITC, a subsequent study focusing on wage earners found that EITC claimants who live in “high knowledge” neighborhoods tended to have wage earnings concentrated in the EITC plateau. Crucially, the authors noted that the welfare consequences of the EITC depend on whether the higher concentration of earnings around the refund-maximizing plateau of the EITC schedule comes from increased earnings for those who would have been in the phase-in region or reduced earnings for those who would have been in the phase-out region.45 Assuming no changes in wage rates, this would imply workers would adjust the number of hours they work to maximize the credit. The authors found that the majority of the clustering effect in the plateau region was from workers whose income originally placed them in the phase-in region working more hours, rather than from those in the phase-out region working fewer hours. These studies suggest that low-income workers may respond to the EITC by increasing hours worked.However, this newer research still does not explain why the EITC apparently does not lead to an overall reduction in hours worked among workers whose income places them in the phase-out range, even though economic theory suggests otherwise.As Hoynes states with respect to workers whose income places them in the phase-out region of the credit “we expect hours to decrease... the literature has failed to find a consistent negative impact of the EITC on hours worked. This, I think, is a bit of a puzzle.” One possible theory is that workers in the phase-in range are part-time workers and can increase their hours in response to the EITC, whereas workers in the phase-out range are likely full-time workers who might not have the option to cut back their hours.....With respect to married couples, research focusing on the secondary earner found that the EITC does tend to result in a slight reduction of hours worked among these workers. One study found that EITC expansions resulted in a 0.57% to 4.37% reduction in hours worked among married women, 47 while another study found a similar reduction of 1% to 4% of hours worked among married women....Studies have not focused on the labor supply effects of the EITC for childless workers. One reason may be because the EITC for childless workers was enacted after the credit for workers with children and unlike the credit for workers with children, the childless EITC formula was never expanded. As previously discussed, many studies of the EITC looked at how legislative expansions of the credit for workers with children affected their labor force decisions. The EITC for childless workers has effectively remained unchanged from its 1993 formula—except for annual inflation adjustments. In addition, the EITC for childless workers is likely too small to encourage workers to work at a low-wage job, especially on a full-time basis. For example, a single childless worker working full time at a minimum wage job49 (40 hours a week, 50 weeks a year) would receive a $59 credit in 2018. In contrast, a single parent with just one child working full time at a minimum wage job would receive a $3,461 credit.....According to economic theory, the EITC will unambiguously increase the workforce participation of single workers because these workers can only receive the credit if they work....However, the income of most earners implies that if they were to marry, the combined family income would place the family in the plateau or phase-out range of the credit.102 Over this income range, the income and substitution effects suggest that the secondary earner would be better off staying out of the labor force, which could lead to a reduction of the labor force participation of these individuals. If the secondary earner were to start working, the family’s EITC would either remain constant (if the family remained in the plateau region of the credit), or fall in value (if the family was in the phase-out region of the credit). In either region, the family would still receive a credit, and the income effect would suggest that the secondary earner would be discouraged from entering the workforce. If the family’s income placed them in the plateau region, the family would receive the same amount of the EITC regardless of the number of hours worked. In other words, the credit would not increase their hourly wage, and hence would have no substitution effect. If the family’s income placed them in the phase-out region of the credit, the value of the credit would fall for each additional hour worked. Hence, the cost of leisure would decline, and according to the substitution effect, a secondary earner would be discouraged from working. Thus, in either case, the combined income and substitution effects would discourage some secondary earners from working...."
Bruce Meyer, "The Earned Income Tax Credit," American Enterprise Institute, 2017, https://www.aei.org/spotlight/the-earned-income-tax-credit/"...I will now summarize the EITC's effects on work, particularly for single mothers. The EITC encourages work by making it unequivocally more attractive to single parents who are considering participating in the labor market at all over a year. Regardless of the hours level, the gain from working has increased. Given that for many single mothers the net return to working is so low (weighing what is gained by work compared to what is lost in welfare and other benefits), a few thousand dollars can dramatically change the calculation in favor of working. I calculated with Dan Rosenbaum that the average net return to working—defined as after-tax earnings plus the cash value of benefits received if a woman worked minus the cash value of benefits received if she did not work and averaged over the earnings distribution of single women—was $7,270 in 1984. Tax changes, primarily the EITC, raised that net return to work by an average of $1,442 by 1996 (in 1996 dollars). The increase in incentives was especially high for the lowest-skilled single mothers, those likely to receive welfare benefits and who, if they worked, were likely to be on the phase-in or plateau portions of the EITC schedule. I also examined with Rosenbaum the EITC's effect on the employment of single mothers using a simple structural model and found that the employment of single mothers in 1996 was 7 percentage points higher because of the EITC. We determined the labor supply effects in this study by contrasting employment changes for single mothers with those of single women without children and employment differences across women with different numbers of children, state taxes, and the real value of the credit relative to state living costs. Other studies have found results that imply similar or even larger estimates, exploiting mostly the same types of contrasts.12 Hours of Work. The EITC's expected effects on hours of work for single parents are complicated. Most recipients are on the plateau or phaseout section of the credit schedule, shown in Figure 1.13 Workers whose level of earnings put them on the plateau section or on the phaseout portion are in principle encouraged to reduce their hours under the EITC. However, this theoretical prediction has not been borne out in the data analyzed to date. This lack of an "hours effect" is one of the more puzzling yet robust findings in the literature....various explanations have been offered for this surprising finding. The most common are: (1) workers' inability to freely vary their hours because of employers' preferences for certain hours, (2) measurement error in hours reported, and (3) imperfect perception of marginal tax rates.15 I think the most plausible explanation is imperfect perception of marginal rates. It would not be surprising if recipients do not fully understand the tax schedule given the complexity of eligibility rules and instructions.16 In recent years, the instructions for the EITC have been a dense 13 or 14 pages. The marginal rates are not reported on the tax forms anywhere, unlike the base income tax rates, for which marginal rates are reported quite clearly on the tax rate schedules. Most recipients do not fill out the tax forms themselves,and those who prepare tax returns for them do not routinely explain marginal rates to clients. Thus, a lack of a response to the incentive to reduce hours may not be too surprising. The EITC's expected effects on work and hours among couples are even more complicated. Since at least one parent likely is working, the effects have some similarities to the hours effects for single current recipients, which in principle means the working parent is encouraged to work fewer hours. With couples, overall hours can be reduced by one of the partners leaving the workforce or by one or more partners reducing hours. The main evidence on this occurrence comes from research from Nada Eissa and Hilary Hoynes and from Bradley Heim.18 While Eissa and Hoynes found that the main effect is a reduction in participation by wives, Heim found mainly a change in hours by those who do work. Both papers found a small reduction in overall hours. A caveat on the labor supply effects of the EITC is in order. The increase in the number of low-wage workers caused by the EITC has likely pushed down wages in low-skilled labor markets in general. This wage reduction decreases the earnings and employment of others. While estimating this effect is harder than estimating the labor supply of recipients,19 the overall EITC labor supply effects are likely overstated by the estimated effect on recipients alone...."
Nada Eissa and Hilary Hoynes, "Redistribution and Tax Expenditures: The Earned Income Tax Credit," National Bureau of Economic Research, September 2008, https://www.nber.org/papers/w14307

"...This paper examines the distributional and behavioral effects of the Earned Income Tax Credit (EITC). We chart the growth of the program over time, and argue several expansions show that real responses to taxes are important. We use tax data to show the distribution of benefits by income and family size, and examine the impacts of hypothetical reforms (expansions and contractions) to the credit. Finally, we calculate the efficiency effects of marginal changes to EITC parameters. Targeting the EITC to lower-income families by raising the phase-out rate generates a welfare loss for single mothers, primarily because of the disincentive to enter the labor market and not the traditional hours-of-work distortion...."
Jesse Rothstein, "Is The EITC Equivalent To An NIT? Conditional Cash Transfers and Tax Incidence," National Bureau of Economic Research, May 2009, https://www.nber.org/papers/w14966.pdf

"....The Earned Income Tax Credit (EITC) is intended to encourage work. But EITC-induced increases in labor supply may drive wages down, shifting the intended transfer toward employers. I simulate the economic incidence of the EITC under a range of plausible supply and demand elasticities. In all of the scenarios that I consider, a substantial portion of the intended transfer to low income single mothers is captured by employers through reduced wages. The transfer to employers is borne in part by low skill workers who are not themselves eligible for the EITC and are therefore made strictly worse off by its existence. I contrast the EITC with a traditional Negative Income Tax (NIT). The NIT discourages work, and so induces large transfers from employers of low skill labor to their workers. With my preferred parameters the EITC increases after-tax incomes by $0.73 per dollar spent, while the NIT yields $1.39...".
Austin Nichols and Jesse Rothstein, "The Earned Income Tax Credit," National Bureau of Economic Research, May 2015, https://www.nber.org/papers/w21211.pdf

"....We review research on the Earned Income Tax Credit (EITC), focusing on work appearing since the Hotz and Scholz (2003) review. Recent work has confirmed earlier findings that labor supply effects are positive for single mothers, smaller and negative for married mothers, and essentially nonexistent for men. Where earlier estimates indicated that all responses were on the extensive margin, some recent studies find evidence of non-zero, but small, intensive margin effects. We also review research on the incidence of the credit, suggesting that employers capture some of the program benefits through lower wages; on the large impact of the program on poverty rates and on children’s outcomes; and on families’ apparent preferences for lump-sum refunds over smaller payments distributed throughout the year. We present new evidence regarding the accuracy of EITC imputations in the Current Population Survey. We discuss proposals for reform, including a more generous childless credit, and argue that the EITC may be complementary to the minimum wage, rather than an alternative...."
Hilary Hoynes and Ankur Patel, "Effective Policy For Reducing Inequality? The Earned Income Tax Credit And The Distribution Of Income," National Bureau of Economic Research, July 2015, https://www.nber.org/papers/w21340.pdfhttps://www.nber.org/papers/w21340.pdf

"....In this paper, we examine the effect of the EITC on the employment and income of single mothers with children. We provide the first comprehensive estimates of this central safety net policy on the full distribution of after-tax and transfer income. We use a quasi-experiment approach, using variation in generosity due to policy expansions across tax years and family sizes. Our results show that a policy-induced $1000 increase in the EITC leads to a 7.3 percentage point increase in employment and a 9.4 percentage point reduction in the share of families with after-tax and transfer income below 100% poverty. Event study estimates show no evidence of differential pre-trends, providing strong evidence in support of our research design. We find that the income increasing effects of the EITC are concentrated between 75% and 150% of income-to-poverty with little effect at the lowest income levels (50% poverty and below) and at levels of 250% of poverty and higher. By capturing the indirect effects of the credit on earnings, our results show that static calculations of the anti-poverty effects of the EITC (such as those released based on the Supplemental Poverty Measure, Short 2014) may be underestimated by as much as 50 percent...."

According to Table 2, of the dropouts (out of labor force for > two years), 74.6% self report "disability." (Note this doesn't mean they are getting SSDI, though it's likely a good proxy)
that 74.6% is a subset of dropouts which make up 5.7% of prime age men (Figure 1) 5.7% of 62 Million, 3.5 million men.

Note, "....Disability is the most important characteristic for separating in-and-outs from dropouts, accounting for more than double the importance of any other variable..."

Of the permanent dropouts who account for 2/3s of the decline in participation, what share is on disability. Is the share on disability, the share of nonparticipators in total or of some sub set of nonparticipators?

".....This paper documents that much of the decline in labor force participation of U.S. prime age men comes from “in-and-outs”—who I define as men who temporarily leave the labor force. Individuals moving in and out of the labor force have been an understudied margin of labor supplybut account for 20-40% of the decline in participation between 1984 and 2011.In-and-outs are distinct from unemployed individuals, experiencing no loss of future income as a result of their time out of the labor force, and represent a distinct margin of labor supply from long-term labor force dropouts.Examining explanations for the rise of in-and-outs, Ifind little evidence to suggest that changes in labor demand are responsible.... In 1960, more than 97% of American men between the ages of 25 and 54 were either employed or actively looking for work. By 2015, this rate had fallen to 88%, representing nearly 5.5 million fewer prime age workers in the labor force at any point in time.... document that participation has changed along an understudied margin of labor supply. I find that “in-and-outs”—men who temporarily leave the labor force—represent a growing fraction of prime age men across multiple data sources and are responsible for 20-40% of the decline in the participation rate between 1984 and 2011. In-and-outs take short, infrequent breaks out of the labor force in between jobs, but they are otherwise continuously attached to the labor force. Leading explanations for the growing share of permanent labor force dropouts, such as disability, do not apply to in-and-outs. Additionally, evidence indicates that the rise of in-and-outs does not result from a decline in labor demand for prime age men. Together, these facts paint a different picture of declining labor supply among prime age men than documented previously..... show that the rise of in-and-outs is a robust phenomenon observed over the last several decades in a number of different longitudinal data sources. In the Survey of Income and Program Participation (SIPP), the share of men who are out of the labor force in any given month rose 5.3 p.p. from 1984 to 2011, with between 1.3 and 2.0 p.p. of this increase coming from nonparticipation spells lasting less than two years. Similar increases in temporary nonparticipation are evident in other longitudinal datasets, including administrative earnings records. Additionally, retrospective data sources inaccurately estimate the number of in-and-outs, as measurement error in retrospective collection is growing over time, possibly due to recall problems or increased rounding by respondents. After returning to the labor force, most in-and-outs are highly attached to the workforce over the subsequent decade.... The rise of in-and-outs appears to be a distinct margin of labor supply from changes in permanent dropouts. The two groups cite different reasons for leaving the labor force, report different qualities of life, and show up in different regions. While some in-andouts could turn into dropouts, the distinctions between these two groups make it more natural to treat them as separate components of the participation decline, with separate explanations, rather than intertwined aspects of the same phenomenon. Additionally, some of the most common explanations that have been put forward for the growth of permanent dropouts, such as disability insurance or incarceration, cannot explain the rise of in-and-outs. In-and-outs do not represent men switching between market-sector work and home production. While out of the labor force, in-and-outs replace time spent working with leisure activities, primarily watching television. In-and-outs do not spend much more time on child care, care for adults, educational activities, or job search during these breaks.....I find that changes in men’s market opportunities can explain little of the rise of in-and-outs.... The rise of in-and-outs forms a different picture of declining labor supply than the common view of men permanently withdrawn from the labor force. In-and-outs are highly attached to the labor force, work typical jobs, and are only notable in that they take brief breaks out of the labor force. I have presented evidence that the increasing prevalence of these breaks does not reflect a change in labor demand. Instead, the rise of in-and-outs may be due to changes in the desired amount of labor supply among prime age men in the US. Since in-and-outs’ breaks are typically short and infrequent, as well as incurring no permanent costs, the rise of in-and-outs likely has had a minimal effect on the inequality of lifetime incomes among men. In contrast, the growth of permanent dropouts over the last several decades, responsible for the other two-thirds of the decline in participation since 1977, likely raised lifetime income inequality substantially. Dropouts not only forgo years of income while out of the labor force but may also experience lower wages if they return to the labor force, compounding the increase in inequality. The differences in consequences between changes along these two margins illustrates the importance of separating in-and-outs from dropouts when studying changes in labor supply....."

John Coglianese, "The Rise of In-and-Outs: Declining Labor Force Participation of Prime Age Men," American Economic Association, January 2019, https://www.aeaweb.org/conference/2019/preliminary/608

New paper finds that the decline in LFP in prime age men is in large part (20-40%) from "in and out" men who pop in and out of the labor force for periods of two years, as opposed to dropouts. these men are largely capable in that there absence from labor force doesn't effect their lifetime earnings, implies it's largely a function of personal preference, "....While out of the labor force, in-and-outs replace time spent working with leisure activities, primarily watching television. In-and-outs do not spend much more time on child care, care for adults, educational activities, or job search during these breaks...."

was in the queue. didn’t include a suggested tweet as it’s based off a largely theoretical model. new NBER finds knowledge diffusion from frontier firms to laggard ones has slowed in the past two decades, due to the frontier firms use of patent law. they find that the slowdown in knowledge diffusion account for more then 70% of the symptoms of declining business dynamism.

“…In the past several decades, the U.S. economy has witnessed a number of striking trends that indicate a rising market concentration and a slowdown in business dynamism. In this paper, we make an attempt to understand potential common forces behind these empirical regularities through the lens of a micro-founded general equilibrium model of endogenous firm dynamics. Importantly, the theoretical model captures the strategic behavior between competing firms, its effect on their innovation decisions, and the resulting “best versus the rest” dynamics. We focus on multiple potential mechanisms that can potentially drive the observed changes and use the calibrated model to assess the relative importance of these channels with particular attention to the implied transitional dynamics. Our results highlight the dominant role of a decline in the intensity of knowledge diffusion from the frontier firms to the laggard ones in explaining the observed shifts. We conclude by presenting new evidence that corroborates a declining knowledge diffusion in the economy. We document a higher concentration of patenting in the hands of firms with the largest stock and a changing nature of patents, especially in the post-2000 period, which suggests a heavy use of intellectual property protection by market leaders to limit the diffusion of knowledge. These findings present a potential avenue for future research on the drivers of declining knowledge diffusion….”

Ufuk Akcigit and Sina T. Ates, “What Happened to U.S. Business Dynamism?,” National Bureau of Economic Research, April 2019, https://www.nber.org/papers/w25756