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Unconditional Child Benefits, Mothers' Labor Supply, and Family Well-Being: Evidence from a Policy Reform

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  • Hener, Timo

Abstract

In many parts of the developed world, governments devote a significant share of public funds to unconditional family cash transfers in an attempt to promote the economic well-being of households. But how successful are such policies? Germany has one of the world's most generous child benefit systems, which was subject to a major reform in the mid-1990s. This article exploits the reform using a difference-indifferences approach. The main result suggests that child benefits lead to a substantial reduction of mothers' labor supply at the intensive margin. The result implies that the policy in question is less effective at improving family finances and, consequently, expensive for the taxpayer because increases in benefit receipt are accompanied by negative labor supply responses. However, suggestive evidence seems to support that parents improve their time investment in children.

Suggested Citation

  • Hener, Timo, 2016. "Unconditional Child Benefits, Mothers' Labor Supply, and Family Well-Being: Evidence from a Policy Reform," Munich Reprints in Economics 43512, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:43512
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    Cited by:

    1. Bartosik Krzysztof, 2023. "The Family 500+ benefit and changes in female employment in Poland," Central European Economic Journal, Sciendo, vol. 10(57), pages 23-34, January.
    2. Grossmann, Jakub & Pertold, Filip & Šoltés, Michal, 2024. "Parental allowance increase and labor supply: Evidence from a Czech reform," Labour Economics, Elsevier, vol. 89(C).
    3. Jensen, Mathias Fjællegaard & Blundell, Jack, 2024. "Income effects and labour supply: Evidence from a child benefits reform," Journal of Public Economics, Elsevier, vol. 230(C).
    4. Simpson, Julija & Albani, Viviana & Bell, Zoe & Bambra, Clare & Brown, Heather, 2021. "Effects of social security policy reforms on mental health and inequalities: A systematic review of observational studies in high-income countries," Social Science & Medicine, Elsevier, vol. 272(C).
    5. Ray Rees & Thor O. Thoresen & Trine E. Vattø, 2023. "Alternatives to Paying Child Benefit to the Rich: Means‐Testing or Higher Tax?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(3), pages 328-354, September.
    6. Kourtney Koebel & Mark Stabile, 2023. "Evaluating the Effects of the 2021 Expansion of the Child Tax Credit: The International Comparative Context," The ANNALS of the American Academy of Political and Social Science, , vol. 710(1), pages 36-56, November.
    7. Jensen, Mathias Fjællegaard & Blundell, Jack, 2023. "Income effects and labour supply: evidence from a child benefits reform," LSE Research Online Documents on Economics 121357, London School of Economics and Political Science, LSE Library.
    8. Lebihan, Laetitia & Mao Takongmo, Charles-Olivier, 2018. "The impact of universal child benefits on family health and behaviours," Research in Economics, Elsevier, vol. 72(4), pages 415-427.

    More about this item

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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