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Effects of labeled child benefits on family savings

Author

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  • Timo Hener

    (Ifo Institute)

Abstract

Contrary to standard microeconomic principles, it is by now well understood that income is not fungible. For example, the label of a government transfer can induce individuals to make expenditure decisions that are skewed towards the label. In this paper, I show that child benefits are disproportionately used for savings assignable to children. I exploit a policy reform in a difference-in-differences approach to estimate the effect of child benefits on savings. The results suggest a significant positive effect on long-term savings and weak evidence for effects on child-assignable consumption. I conclude that labeling effects should be considered carefully by policy makers, if not for nudging individuals, then to avoid affecting decisions unintentionally.

Suggested Citation

  • Timo Hener, 2017. "Effects of labeled child benefits on family savings," Review of Economics of the Household, Springer, vol. 15(3), pages 759-777, September.
    • Handle: RePEc:kap:reveho:v:15:y:2017:i:3:d:10.1007_s11150-015-9291-z
    DOI: 10.1007/s11150-015-9291-z
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    Cited by:

    1. Grogan, Louise, 2018. "The Labeling Effect of a Child Benefits System: Evidence from Russia 1994-2015," IZA Discussion Papers 11962, Institute of Labor Economics (IZA).
    2. Barbara Liberda & Katarzyna Sałach & Marek Pęczkowski, 2023. "The Effects of Child Benefit on Household Saving," Journal of Family and Economic Issues, Springer, vol. 44(2), pages 447-460, June.
    3. Mari, Gabriele & Keizer, Renske, 2021. "Do high-income households 'label' family cash transfers? Evidence on family expenditures from Australia," SocArXiv ucyzb, Center for Open Science.
    4. Shirleen Manzur & Krishna Pendakur, 2023. "Labeling vs Targeting: How did the Canada Child Benefit affect household bargaining and preferences?," Discussion Papers dp23-01, Department of Economics, Simon Fraser University.
    5. Wang, Julia Shu-Huah & Zhang, Jinbao & Fu, Tsung-Hsi, 2021. "The effects of universal child allowance on family expenditure in Taiwan," Children and Youth Services Review, Elsevier, vol. 129(C).

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    More about this item

    Keywords

    Mental accounting; Labeling effects; Child benefits; Savings;
    All these keywords.

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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