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Female Labour Supply, Human Capital and Welfare Reform

  • Blundell, Richard

    ()

    (University College London)

  • Costa Dias, Monica

    ()

    (Institute for Fiscal Studies, London)

  • Meghir, Costas

    ()

    (Yale University)

  • Shaw, Jonathan

    ()

    (Institute for Fiscal Studies, London)

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 analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings, we 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 labor 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7375.

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Length: 59 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7375
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  19. 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.
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  22. 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.
  23. Paul Gregg & Susan Harkness & Sarah Smith, 2007. "Welfare Reform and Lone Parents in the UK," The Centre for Market and Public Organisation 07/182, Department of Economics, University of Bristol, UK.
  24. Stefanie Stantcheva, 2015. "Optimal Taxation and Human Capital Policies over the Life Cycle," NBER Working Papers 21207, National Bureau of Economic Research, Inc.
  25. 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.
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  27. Mark Huggett & Gustavo Ventura & Amir Yaron, 2010. "Sources of Lifetime Inequality," Working Papers 2011-020, Human Capital and Economic Opportunity Working Group.
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  38. Blundell, Richard & Meghir, Costas & Neves, Pedro, 1993. "Labour supply and intertemporal substitution," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 137-160, September.
  39. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
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