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Financial Support for Families with Children and its Trade-offs: Balancing Redistribution and Parental Work Incentives

  • Myck, Michal

    ()

    (Centre for Economic Analysis, CenEA)

  • Kurowska, Anna

    ()

    (Warsaw University)

  • Kundera, Michał

    ()

    (Centre for Economic Analysis, CenEA)

Financial support for families with children implies inherent trade-offs some of which are less obvious than others. In the end these trade-offs determine the effectiveness of policy with respect to the material situation of families and employment of their parents. We analyse several kinds of trade-offs involved using a careful selection of potential changes to the system of financial support for families with children. We focus on: 1) the trade-off between redistribution of income to poorer households and improving work incentives, 2) the trade-off between improving work incentives for first and for second earners in couples, 3) the trade-off between improving work incentives for those facing strong and weak incentives in the baseline system. The exercise is conducted on data from Poland, a country characterized by high levels of child poverty, low female employment and one of the lowest fertility rates in Europe. We demonstrate the complexity of potential consequences of family support policy and stress the need for well-defined policy goals and careful analysis ahead of any reform.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7506.

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Length: 36 pages
Date of creation: Jul 2013
Date of revision:
Publication status: published in: Baltic Journal of Economics, 2013, 13 (2)
Handle: RePEc:iza:izadps:dp7506
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  1. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," OECD Social, Employment and Migration Working Papers 28, OECD Publishing.
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  3. Peter Haan & Katharina Wrohlich, 2009. "Can Child Care Policy Encourage Employment and Fertility?: Evidence from a Structural Model," Discussion Papers of DIW Berlin 935, DIW Berlin, German Institute for Economic Research.
  4. Bargain, Olivier & Orsini, Kristian, 2006. "In-work policies in Europe: Killing two birds with one stone?," Labour Economics, Elsevier, vol. 13(6), pages 667-697, December.
  5. Olivier Thévenon & Angela Luci, 2012. "Reconciling Work, Family and Child Outcomes: What Implications for Family Support Policies?," Population Research and Policy Review, Springer, vol. 31(6), pages 855-882, December.
  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. Bargain, Olivier & Morawski, Leszek & Myck, Michal & Socha, Mieczyslaw, 2007. "As SIMPL As That: Introducing a Tax-Benefit Microsimulation Model for Poland," IZA Discussion Papers 2988, Institute for the Study of Labor (IZA).
  8. 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.
  9. Anna Matysiak & Daniele Vignoli, 2006. "Fertility and women’s employment: a meta-analysis," MPIDR Working Papers WP-2006-048, Max Planck Institute for Demographic Research, Rostock, Germany.
  10. Michal Myck & Howard Reed, 2006. "Tax and Benefit Reforms in a Model of Labour Market Transitions," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(3), pages 208-239.
  11. Tom Kornstad & Thor O. Thoresen, 2002. "A Discrete Choice Model for Labor Supply and Child Care," Discussion Papers 315, Research Department of Statistics Norway.
  12. Levy, Horacio & Morawski, Leszek & Myck, Michal, 2008. "Alternative tax-benefit strategies to support children in Poland," EUROMOD Working Papers EM3/08, EUROMOD at the Institute for Social and Economic Research.
  13. Stuart Adam & James Browne, 2010. "Redistribution, work incentives and thirty years of UK tax and benefit reform," IFS Working Papers W10/24, Institute for Fiscal Studies.
  14. repec:nbp:journl:v:41:y:2010:i:3:p:5-34 is not listed on IDEAS
  15. Dearing, Helene & Hofer, Helmut & Lietz, Christine & Winter-Ebmer, Rudolf & Wrohlich, Katharina, 2007. "Why are Mothers Working Longer Hours in Austria than in Germany? A Comparative Micro Simulation Analysis," Economics Series 213, Institute for Advanced Studies.
  16. Haan, Peter & Myck, Michal, 2008. "Multi-Family Households in a Labour Supply Model: A Calibration Method with Application to Poland," IZA Discussion Papers 3611, Institute for the Study of Labor (IZA).
  17. Edith Duclos & Pierre Lefebvre & Philip Merrigan, 2001. "A 'Natural Experiment' on the Economics of Storks: Evidence on the Impact of Differential Family Policy on Fertility Rates in Canada," Cahiers de recherche CREFE / CREFE Working Papers 136, CREFE, Université du Québec à Montréal.
  18. Blundell, Richard, 2001. "Welfare Reform for Low Income Workers," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 189-214, April.
  19. Peter Haan & Michal Myck, 2006. "Apply with Caution: Introducing UK-Style In-work Support in Germany," Discussion Papers of DIW Berlin 555, DIW Berlin, German Institute for Economic Research.
  20. Leszek Morawski & Michal Myck, 2008. "'Klin'-ing up: effects of Polish tax reforms on those in and on those out," IFS Working Papers W08/12, Institute for Fiscal Studies.
  21. Anne Gauthier, 2007. "The impact of family policies on fertility in industrialized countries: a review of the literature," Population Research and Policy Review, Springer, vol. 26(3), pages 323-346, June.
  22. Tom Clark & Andrew Dilnot & Alissa Goodman & Michal Myck, 2002. "Taxes and Transfers 1997--2001," Oxford Review of Economic Policy, Oxford University Press, vol. 18(2), pages 187-201, June.
  23. 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.
  24. Peter Whiteford & Willem Adema, 2007. "What Works Best in Reducing Child Poverty: A Benefit or Work Strategy?," OECD Social, Employment and Migration Working Papers 51, OECD Publishing.
  25. Anders Björklund, 2006. "Does family policy affect fertility?," Journal of Population Economics, Springer, vol. 19(1), pages 3-24, February.
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