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Means-testing the Child Benefit

Improving the distributional impact of transfers may be costly if it reduces labour supply. In this paper we show how effects of changes in the design of the child benefit programme can be examined by deriving information from behavioural and non-behavioural simulations on micro data. The direct distributional effects are assessed by tax-benefit model calculations. Female labour supply responses to alternative child benefit schemes are simulated under the assumption that choices are discrete. The discrete choice model is justified with reference to the complicated process of finding a new job, and the existence of peaks in the empirical distribution of hours is interpreted as variation in number of jobs across states. The distribution of income after labour supply responses is also shown. The analysis confirms that enhanced distributional impact is traded against reductions in labour supply.

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Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 262.

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Date of creation: Nov 1999
Date of revision:
Handle: RePEc:ssb:dispap:262
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  1. Creedy, John, 1996. "Comparing Tax and Transfer Systems: Poverty, Inequality and Target Efficiency," Economica, London School of Economics and Political Science, vol. 63(250), pages S163-74, Suppl..
  2. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  3. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  4. Duncan, Alan & Weeks, Melvyn, 1997. "Behavioural tax microsimulation with finite hours choices," European Economic Review, Elsevier, vol. 41(3-5), pages 619-626, April.
  5. Creedy, John, 1998. "Means-Tested versus Universal Transfers: Alternative Models and Value Judgements," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(1), pages 100-117, January.
  6. David Neumark & Andrew Postlewaite, 1995. "Relative Income Concerns and the Rise in Married Women's Employment," NBER Working Papers 5044, National Bureau of Economic Research, Inc.
  7. Aaberge, Rolf, 1997. "Interpretation of changes in rank-dependent measures of inequality," Economics Letters, Elsevier, vol. 55(2), pages 215-219, August.
  8. Paul Bingley & Gauthier Lanot & Elizabeth Symons & Ian Walker, 1995. "Child Support Reform and the Labor Supply of Lone Mothers in the United Kingdom," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 256-279.
  9. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  10. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-29, February.
  11. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
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