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Female Labour Supply, Human Capital and Welfare Reform

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Author Info

  • Richard Blundell

    (University College London)

  • Monica Costa Dias

    (Institute for Fiscal Studies and CEF-UP at the University of Porto)

  • Costas Meghir

    ()
    (Cowles Foundation, Yale University)

  • Jonathan Shaw

    (Institute for Fiscal Studies and University College London)

Abstract

We consider the impact of Tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We thus analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings we are also able to quantify the insurance value of alternative programs. We find important incentive effects on education choice, and labor supply, with single mothers having the most elastic labor supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with more than basic formal education. For those with lower education the welfare programs are shown to have substantial insurance value. Based on the model marginal increases to tax credits are preferred to equally costly increases in income support and to tax cuts, except by those in the highest education group.

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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1892.

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Length: 53 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:cwl:cwldpp:1892

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

Related research

Keywords: Female labor supply; Welfare reform; Tax credits; Education choice; Dynamic discrete choice models; Life cycle models;

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References

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  1. Adda, Jerome & Dustmann, Christian & Stevens, Katrien, 2011. "The Career Costs of Children," CEPR Discussion Papers 8697, C.E.P.R. Discussion Papers.
  2. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  3. Virginia Sanchez-Marcos & Orazio Attanasio & Hamish Low, 2004. "Explaining Changes in Female Labour Supply in a Life-Cycle Model," 2004 Meeting Papers 492, Society for Economic Dynamics.
  4. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  5. Blundell, Richard & Duncan, Alan & Meghir, Costas, 1992. "Taxation in Empirical Labour Supply Models: Lone Mothers in the UK," Economic Journal, Royal Economic Society, vol. 102(411), pages 265-78, March.
  6. 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.
  7. 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).
  8. Giovanni L. Violante & Costas Meghir & Giovanni Gallipoli, 2008. "Equilibrium Effects of Education Policies: a Quantitative Evaluation," 2008 Meeting Papers 868, Society for Economic Dynamics.
  9. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June.
  10. Jonathan Shaw, 2011. "FORTAX: UK tax and benefit system documentation," IFS Working Papers W11/08, Institute for Fiscal Studies.
  11. Luigi Pistaferri, 2003. "Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labor Supply," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 729-754, July.
  12. Blundell, Richard & Walker, Ian, 1986. "A Life-Cycle Consistent Empirical Model of Family Labour Supply Using Cross-Section Data," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 539-58, August.
  13. 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.
  14. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Gianluca Violante, 2013. "Education Policy and Intergenerational Transfers in Equilibrium," Working Papers 2013-010, Human Capital and Economic Opportunity Working Group.
  15. Marco Francesconi & Helmut Rainer & Wilbert vanderKlaauw, 2009. "The Effects of In-Work Benefit Reform in Britain on Couples: Theory and Evidence," Economic Journal, Royal Economic Society, vol. 119(535), pages F66-F100, 02.
  16. Richard Blundell & Antoine Bozio & Guy Laroque, 2011. "Extensive and intensive margins of labour supply: working hours in the US, UK and France," IFS Working Papers W11/01, Institute for Fiscal Studies.
  17. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  18. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  20. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  21. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
  22. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May.
  23. Blundell, Richard & Meghir, Costas & Neves, Pedro, 1993. "Labour supply and intertemporal substitution," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 137-160, September.
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