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Tax Credits, Income Support and Partnership Decisions

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  • Dan Anderberg

Abstract

This paper considers the potential impact of welfare benefits on the partnership status of women in the UK. Using recent policy reforms to identify the response rate I find that a £100/week welfare benefit “partnership penalty” reduces the probability of a woman having a partner by seven percentage points. I also use the model to explore the potential effects of the recent Tax Credit reforms on partnership rates; I find that while the 1999 WFTC reform improved partnership incentives this effect was effectively undone by the 2003 WTC/CTC reform.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2147.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2147

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Keywords: welfare benefits; tax credits; family structure;

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References

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  1. V. Joseph Hotz & John Karl Scholz, 2001. "The Earned Income Tax Credit," NBER Working Papers 8078, National Bureau of Economic Research, Inc.
  2. Robert F. Schoeni & Rebecca M. Blank, 2000. "What Has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure," Working Papers, RAND Corporation Publications Department 00-02, RAND Corporation Publications Department.
  3. Hilary Williamson Hoynes, 1995. "Does Welfare Play Any Role in Female Headship Decisions?," NBER Working Papers 5149, National Bureau of Economic Research, Inc.
  4. Marianne Bitler & Jonah Gelbach & Hilary Hoynes & Madeline Zavodny, 2004. "The impact of welfare reform on marriage and divorce," Demography, Springer, vol. 41(2), pages 213-236, May.
  5. Williamson Hoyne, Hilary, 1997. "Does welfare play any role in female headship decisions?," Journal of Public Economics, Elsevier, vol. 65(2), pages 89-117, August.
  6. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
  7. Steven Stern & Michael J. Brien & Lee A. Lillard, 1999. "Cohabitation, Marriage, and Divorce in a Model of Match Quality," Virginia Economics Online Papers 322, University of Virginia, Department of Economics.
  8. Richard Blundell & Hilary W. Hoynes, 2004. "Has 'In-Work' Benefit Reform Helped the Labor Market?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 411-460 National Bureau of Economic Research, Inc.
  9. Ellwood, David T., 2000. "The Impact of the Earned Income Tax Credit and Social Policy Reforms on Work, Marriage, and Living Arrangements," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1063-1106, December.
  10. Paul Gregg & Susan Harkness, 2003. "Welfare Reform and Lone Parents Employment in the UK," The Centre for Market and Public Organisation 03/072, Department of Economics, University of Bristol, UK.
  11. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
  12. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  13. van der Klaauw, Wilbert, 1996. "Female Labour Supply and Marital Status Decisions: A Life-Cycle Model," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 199-235, April.
  14. Mark R. Rosenzweig, 1999. "Welfare, Marital Prospects, and Nonmarital Childbearing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(S6), pages S3-S32, December.
  15. Reagan Baughman & Stacy Dickert-Conlin, 2003. "Did Expanding the EITC Promote Motherhood?," American Economic Review, American Economic Association, vol. 93(2), pages 247-251, May.
  16. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  17. Ian Walker & Yu Zhu, 2006. "Child Support and Partnership Dissolution," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(510), pages C93-C109, 03.
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Cited by:
  1. Mike Brewer & Anita Ratcliffe & Sarah Smith, 2007. "Does Welfare Reform Affect Fertility? Evidence from the UK," The Centre for Market and Public Organisation 07/177, Department of Economics, University of Bristol, UK.
  2. Spencer Bastani, 2013. "Gender-based and couple-based taxation," International Tax and Public Finance, Springer, vol. 20(4), pages 653-686, August.

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