Richard Blundell () (Institute for Fiscal Studies and University College London) Alan Duncan () (Institute for Fiscal Studies and University of Nottingham) Julian McCrae (Institute for Fiscal Studies) Costas Meghir () (Institute for Fiscal Studies and University College London)
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In October 1999, the working families’ tax credit (WFTC) replaced family credit as the main package of in-work support for families with children. Among a range of stated aims, the WFTC is intended to ‘... improve work incentives, encouraging people without work to move into employment’. In this paper, we consider the impact of WFTC on hours and participation. To simulate labour supply responses, we use a discrete behavioural model of household labour supply with controls for fixed and childcare costs, and unobserved heterogeneity. In simulation, we experiment with a number of scenarios regarding the take-up of the credit, entry wage level and hourly childcare price. We find participation rates among single mothers to increase by around 2.2 percentage points for the base-case scenario, while for married women participation rates are modelled to fall. Our simulation results indicate a small increase in overall participation of around 30,000 individuals.
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.
Volume (Year): 21 (2000) Issue (Month): 1 (March) Pages: 75-103 Download reference. The following formats are available: HTML
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Handle: RePEc:ifs:fistud:v:21:y:2000:i:1:p:75-103
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Find related papers by JEL classification: C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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