Evaluating the effectiveness of in-work tax credits
One of the principle aims of the Working Families’ Tax Credit in the UK was to increase the participation of single mothers in work. The difference-in-differences methodology that is typically used to evaluate tax credit policies compares single mothers with single women without children. However, the characteristics of these groups are very different, and changes over time in relative covariates are likely to violate key identifying assumptions. We find that when we control for differential trends between women with and without children, the employment effect of the policy falls significantly. Moreover, closer inspection shows that while there was an effect on increasing the likelihood to work full-time (30 h or more), there was no effect on reducing the likelihood to be inactive. Looking closely at important covariates before and after the policy introduction, we can see sizeable changes in the relative returns to employment between the treatment and control groups, making it difficult to assess the policy effectiveness. Copyright Springer-Verlag Berlin Heidelberg 2014
Volume (Year): 46 (2014)
Issue (Month): 2 (March)
|Contact details of provider:|| Postal: |
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://link.springer.de/link/service/journals/00181/index.htm
More information through EDIRC
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nada Eissa & Austin Nichols, 2005. "Tax-Transfer Policy and Labor-Market Outcomes," American Economic Review, American Economic Association, vol. 95(2), pages 88-93, May.
- Paul Gregg & Susan Harkness & Sarah Smith, 2009.
"Welfare Reform and Lone Parents in the UK,"
Royal Economic Society, vol. 119(535), pages F38-F65, 02.
- Francesconi, Marco & Rainer, Helmut & Klaauw,, 2009. "The effects of in-work benefit reform in Britain on couples: Theory and evidence," Munich Reprints in Economics 20334, University of Munich, Department of Economics.
- 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.
- Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Marco Francesconi & Helmut Rainer & Wilbert van der Klaauw, 2007.
"The Effects of In-Work Benefit Reform in Britain on Couples: Theory and Evidence,"
CRIEFF Discussion Papers
0709, Centre for Research into Industry, Enterprise, Finance and the Firm.
- 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.
- Francesconi, Marco & Rainer, Helmut & van der Klaauw, Wilbert, 2007. "The Effects of In-Work Benefit Reform in Britain on Couples: Theory and Evidence," IZA Discussion Papers 2980, Institute for the Study of Labor (IZA).
- Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, vol. 106(434), pages 142-55, January.
When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:46:y:2014:i:2:p:397-425. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.