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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.

Suggested Citation

  • Tom Kornstad & Thor O. Thoresen, 1999. "Means-testing the Child Benefit," Discussion Papers 262, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:262

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    References listed on IDEAS

    1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
    2. 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.
    3. 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.
    4. 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.
    5. 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 1059-1085, December.
    6. Aaberge, Rolf, 1997. "Interpretation of changes in rank-dependent measures of inequality," Economics Letters, Elsevier, vol. 55(2), pages 215-219, August.
    7. 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 635-659, December.
    8. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-129, February.
    9. 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 163-174, Suppl..
    10. Duncan, Alan & Weeks, Melvyn, 1997. "Behavioural tax microsimulation with finite hours choices," European Economic Review, Elsevier, vol. 41(3-5), pages 619-626, April.
    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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    Cited by:

    1. Tom Kornstad & Thor O. Thoresen, 2006. "Effects of family policy reforms in Norway: results from a joint labour supply and childcare choice microsimulation analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 27(3), pages 339-371, August.
    2. R. Aaberge & U. Colombino & T. Wennemo, 2009. "Evaluating Alternative Representations Of The Choice Sets In Models Of Labor Supply," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 586-612, July.
    3. John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
    4. Guyonne Kalb & Thor Thoresen, 2010. "A comparison of family policy designs of Australia and Norway using microsimulation models," Review of Economics of the Household, Springer, vol. 8(2), pages 255-287, June.

    More about this item


    Micro simulation; Labour supply; Discrete choice; Means-testing;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply


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