The Impact of Labor Income Reward Plan: An EITC Experiment in China

Last registered on January 03, 2020

Pre-Trial

Trial Information

General Information

Title
The Impact of Labor Income Reward Plan: An EITC Experiment in China
RCT ID
AEARCTR-0005212
Initial registration date
December 27, 2019
Last updated
January 03, 2020, 5:20 PM EST

Locations

Primary Investigator

Affiliation
Department of Economics, Texas A&M University

Other Primary Investigator(s)

PI Affiliation
China Household Finance Survey
PI Affiliation
China Household Finance Survey
PI Affiliation
Texas A&M University

Additional Trial Information

Status
Completed
Start date
2014-05-01
End date
2017-02-28
Secondary IDs
Abstract
China currently has no social welfare programs such as the Earned Income Tax Credits (EITC) in the United States. Yet, the literature and global evidence have suggested EITC-type programs' potentials on poverty alleviation and work incentives. This paper examines the first-ever EITC field experiment in China with strong treatment intensity (20% of household monthly income) and rigorous validation procedure. The two-year experiment on 259 households shows that the participation of the program increases employment by 0.33 person per household (14%) and monthly working hours by 81 hours (40%) per household. We also find significant increases in household earnings and expenditures. These effects are substantially larger than the existing literature partially because of the strong treatment intensity. Our study contributes to a large literature that studies the effect of in-work benefits.
External Link(s)

Registration Citation

Citation
Gan, Li et al. 2020. "The Impact of Labor Income Reward Plan: An EITC Experiment in China." AEA RCT Registry. January 03. https://doi.org/10.1257/rct.5212-1.0
Experimental Details

Interventions

Intervention(s)
Labor Income Reward Palan: The scheme of the Labor Income Reward Plan is similar to EITC in the United States. Namely, for the first 400 RMB (80 USD) earning per capita, the reward will be a 50% of the earnings for households with less one child, and a 40% for those with two or more children. When the earning per capita is between 400 RMB to 600 RMB, the reward is 200 RMB per capita for households with less than one child and 160 RMB per capita for households with two or more children. Then, the reward will start to decline as the earnings increases. The rate of decline is 50% for households with less than one child and 40% for households with two or more children. At this rate, the reward will decline to zero once the earning reaches 1,000 RMB regardless of the number of children.
Intervention Start Date
2014-12-01
Intervention End Date
2017-02-28

Primary Outcomes

Primary Outcomes (end points)
The two-year experiment on 259 households shows that the participation of the program increases employment by 0.33 person per household and monthly working hours by 81 hours per household.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
We also find significant increases in household earnings and expenditures.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The experiment contains two stages. The first stage is the pilot, and the second stage is the actual experiment. The pilot is a small-scaled RCT experiment with only 65 households in the sample. The purpose is to figure out all the policy parameters that will fit the budget and anticipate potential problems during the execution. For the experiment, first, we received a list of households (around 200) the local government wants us to consider. Then we randomly assigned them into the treatment and the control group.

All households in the treatment group enrolled in the EITC program and will receive a cash reward every month. The amount of reward depends on household earnings during the last month.

Once a household is enrolled, the household will have to report the earning and employment status (of all members) every month in order to get the reward. Each claim needs supporting materials such as proof of employment and income. There are auditing and validation processes to verify the claims. Finally, we track other changes through household surveys.

Finally, we compared outcomes such as employment and hours worked between the two groups to identify the effectiveness of the EITC program.
Experimental Design Details
Randomization Method
By computer
Randomization Unit
Odd and even group
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
259 Households
Sample size: planned number of observations
259 Households
Sample size (or number of clusters) by treatment arms
131 households treated, 128 households control
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
Texas A&M University IRB
IRB Approval Date
2019-11-08
IRB Approval Number
IRB2019-1069M

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials