The expanded Child Tax Credit and economic wellbeing of low-income families

Using a parameterized difference-in-differences approach, we study the impact of the 2021 expansion of the Child Tax Credit (CTC) in the USA, which provided monthly cash payments to families with children for 6 months. We examine the effects of the CTC on the economic wellbeing (material hardship, ability to meet needs/money on hand, hardship avoidance techniques, and employment) of families with very low incomes. This population is especially important to study as these families disproportionately benefited from the 2021 CTC expansion. We find that the 2021 monthly CTC reduced the number of hardships families experienced, especially food insecurity. We find weak evidence that the credit reduced medical hardships and reliance on friends and family for food and that it had no impact on labor supply.