Who Benefits from Child Benefit?
AbstractGovernments, over much of the developed world, make significant financial transfers to parents with dependent children. For example, in the US the recently introduced Child Tax Credit (CTC), which goes to almost all children, costs almost $1billion each week, or about 0.4% of GNP. The UK has even more generous transfers and spends about $25 a week on each of about 8 million children – about 1% of GNP. The typical rationale given for these transfers is that they are good for our children and here we investigate the effect of such transfers on household spending patterns. The UK is an excellent laboratory to address this issue because such transfers, known as Child Benefit (CB) have been simple lump sum universal payments for a continuous period of more than 20 years. We do indeed find that CB is spent differently from other income – paradoxically, it appears to be spent disproportionately on adult-assignable goods. In fact we estimate that as much as half of a marginal pound of CB is spent on alcohol. We resolve this puzzle by showing that the effect is confined to unanticipated variation in CB so we infer that parents are sufficiently altruistic towards their children that they completely insure them against shocks.
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Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 200716.
Length: 31 pages
Date of creation: 08 Jun 2007
Date of revision:
altruism; child poverty; intra-household transfers;
Other versions of this item:
- Blow, Laura & Walker, Ian & Zhu, Yu, 2006. "Who benefits from Child Benefit?," The Warwick Economics Research Paper Series (TWERPS) 749, University of Warwick, Department of Economics.
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- D79 - Microeconomics - - Analysis of Collective Decision-Making - - - Other
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-24 (All new papers)
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- Who really gets child benefit?
by chris dillow in Stumbling and Mumbling on 2010-10-05 12:24:34
- Pregnancy pay-out nonsense
by chris dillow in Stumbling and Mumbling on 2007-09-10 09:43:53
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